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A Study on the Efficiency of the Market for Dutch Long Term Call Options
Frans De Roon Tilburg University - Department of Finance Chris Veld University of Stirling - Faculty of Management Jason Zhanshun Wei University of Toronto - Joseph L. Rotman School of Management December 1995 Abstract: We investigate the efficiency of the market for 5 year call options which are traded on the European Options Exchange in Amsterdam. We study both delta, delta-vega, and delta-gamma neutral arbitrage portfolios. We do not detect any serious inefficiencies in the market for Dutch long term call options. This result is in line with previous studies on different kinds of call options and warrants. The results for the delta-vega and delta-gamma neutral arbitrage strategies differ from the results of the simple delta-neutral strategies in two ways: they lead to positive results more often, but the variance of these results is also larger.
JEL Classifications: G13 Working Paper SeriesDate posted: January 26, 1996 ; Last revised: August 14, 1997Suggested CitationContact Information
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