Efficiency of the foreign currency options market
This paper provides a new test of the efficiency of the currency option markets for four major cyrrencies -British Pound, Euro, Swiss Frank and Japanese Yen vis-a-vis the U.S. dollar. The approach is to simulate trading strategies to see if the well accepted no-arbitrage condition of put-call parity...
| Main Authors: | , , |
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| Format: | Journal Article |
| Published: |
Elsevier BV, North-Holland
2008
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| Online Access: | http://hdl.handle.net/20.500.11937/18699 |
| _version_ | 1848749820021309440 |
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| author | Hoque, Mohammed Chan, Felix Manzur, Meher |
| author_facet | Hoque, Mohammed Chan, Felix Manzur, Meher |
| author_sort | Hoque, Mohammed |
| building | Curtin Institutional Repository |
| collection | Online Access |
| description | This paper provides a new test of the efficiency of the currency option markets for four major cyrrencies -British Pound, Euro, Swiss Frank and Japanese Yen vis-a-vis the U.S. dollar. The approach is to simulate trading strategies to see if the well accepted no-arbitrage condition of put-call parity (PCP) holds in a trading environment. Augmented Dickey-Fuller and Philips-Perron test are used to check for the presence of unit root in the data, followed by a formal econometric analysis. The results indicate that the most currency option prices do not violate the PCP conditions, when transaction costs are allowed for. |
| first_indexed | 2025-11-14T07:27:00Z |
| format | Journal Article |
| id | curtin-20.500.11937-18699 |
| institution | Curtin University Malaysia |
| institution_category | Local University |
| last_indexed | 2025-11-14T07:27:00Z |
| publishDate | 2008 |
| publisher | Elsevier BV, North-Holland |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | curtin-20.500.11937-186992018-03-29T09:06:23Z Efficiency of the foreign currency options market Hoque, Mohammed Chan, Felix Manzur, Meher This paper provides a new test of the efficiency of the currency option markets for four major cyrrencies -British Pound, Euro, Swiss Frank and Japanese Yen vis-a-vis the U.S. dollar. The approach is to simulate trading strategies to see if the well accepted no-arbitrage condition of put-call parity (PCP) holds in a trading environment. Augmented Dickey-Fuller and Philips-Perron test are used to check for the presence of unit root in the data, followed by a formal econometric analysis. The results indicate that the most currency option prices do not violate the PCP conditions, when transaction costs are allowed for. 2008 Journal Article http://hdl.handle.net/20.500.11937/18699 10.1016/j.gfj.2008.02.002 Elsevier BV, North-Holland restricted |
| spellingShingle | Hoque, Mohammed Chan, Felix Manzur, Meher Efficiency of the foreign currency options market |
| title | Efficiency of the foreign currency options market |
| title_full | Efficiency of the foreign currency options market |
| title_fullStr | Efficiency of the foreign currency options market |
| title_full_unstemmed | Efficiency of the foreign currency options market |
| title_short | Efficiency of the foreign currency options market |
| title_sort | efficiency of the foreign currency options market |
| url | http://hdl.handle.net/20.500.11937/18699 |