A Study on the Efficiency of the Market for Dutch Long Term Call Options
Frans De Roon
Tilburg University - Department of Finance
University of Glasgow
Jason Zhanshun Wei
University of Toronto - Rotman School of Management
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.
Number of Pages in PDF File: 24
JEL Classification: G13working papers series
Date posted: January 26, 1996
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