A Study on the Efficiency of the Market for Dutch Long Term Call Options

24 Pages Posted: 26 Jan 1996

See all articles by Frans de Roon

Frans de Roon

Tilburg University - Department of Finance

Chris Veld

Monash University

Jason Zhanshun Wei

University of Toronto - Rotman School of Management

Date Written: 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 Classification: G13

Suggested Citation

de Roon, Frans A. and Veld, Chris and Wei, Jason Zhanshun, A Study on the Efficiency of the Market for Dutch Long Term Call Options (December 1995). Available at SSRN: https://ssrn.com/abstract=902 or http://dx.doi.org/10.2139/ssrn.902

Frans A. De Roon

Tilburg University - Department of Finance ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands
+31 1 3466 8361/3025 (Phone)
+31 1 3466 2875 (Fax)

Chris Veld (Contact Author)

Monash University ( email )

Building 11E
Clayton, Victoria 3800
Australia

Jason Zhanshun Wei

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada
416-978-3698 (Phone)
416-971-3048 (Fax)

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