Abstract

http://ssrn.com/abstract=1537040
 
 

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Options Mispricing in Indian Derivative Markets: A Multiple Models Application Framework


Ravi Agarwal


Birla Institute of Management Technology

Wasif Mukhtar


Deloitte Touche Tohmatsu India

Nataraj K.


Birla Institute of Management Technology (BIMTECH)

Sweta Agarwal


affiliation not provided to SSRN

Ridhima Arora


affiliation not provided to SSRN

January 15, 2010


Abstract:     
Some studies show that the performance of option strategies with stock portfolios could depend on other factors or on market conditions. Benninga and Blume (1985) analyzed the optimality of portfolio insurance in complete and incomplete markets, and found that buying put option may be optimal only in an incomplete market, not in a complete market. Brooks and Hand (1988) examined the return characteristics of index futures contracts, and found that both the return distribution and performance evaluation depend on the risk-free rate, the dividend rate, the basis and the margins. In the present study, we have computed implied volatility using a number of models and statistically compared each of them with the historical one. We propose to advocate a portfolio strategy based on such mispricing of options contracts.

Number of Pages in PDF File: 21

Keywords: Derivatives, BSOPM, Implied Volatility

JEL Classification: G12, G32

working papers series


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Date posted: January 18, 2010 ; Last revised: February 20, 2010

Suggested Citation

Agarwal, Ravi and Mukhtar, Wasif and K., Nataraj and Agarwal, Sweta and Arora, Ridhima, Options Mispricing in Indian Derivative Markets: A Multiple Models Application Framework (January 15, 2010). Available at SSRN: http://ssrn.com/abstract=1537040 or http://dx.doi.org/10.2139/ssrn.1537040

Contact Information

Ravi Kumar Agarwal (Contact Author)
Birla Institute of Management Technology ( email )
Plot No.5
Knowledge Park II
Greader Noida, UP 201306
India
HOME PAGE: http://www.bimtech.ac.in/Ravi.Agarwal.html
Wasif Mukhtar
Deloitte Touche Tohmatsu India ( email )
Hyderabad
India
Nataraj K.
Birla Institute of Management Technology (BIMTECH) ( email )
Plot No. 5
Knowledge Park II
Greader Noida, CA Uttar Pradesh 201306
India
Sweta Agarwal
affiliation not provided to SSRN ( email )
Ridhima Arora
affiliation not provided to SSRN
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