Portal de Periódicos da CAPES

Index Options: The Early Evidence

1985; Wiley; Volume: 40; Issue: 3 Linguagem: Inglês

10.2307/2327798

1540-6261

Jeremy Evnine, Andrew Rudd,

Financial Markets and Investment Strategies

The Journal of FinanceVolume 40, Issue 3 p. 743-756 Article Index Options: The Early Evidence JEREMY EVNINE, JEREMY EVNINESearch for more papers by this authorANDREW RUDD, ANDREW RUDD Wells Fargo Investment Advisors, and BARRA and the University of California at Berkeley, respectively. We are grateful to Options Research, Inc., San Francisco, California, who provided our index options prices data base, and Blair Hull for advice. This research was supported by BARRA.Search for more papers by this author JEREMY EVNINE, JEREMY EVNINESearch for more papers by this authorANDREW RUDD, ANDREW RUDD Wells Fargo Investment Advisors, and BARRA and the University of California at Berkeley, respectively. We are grateful to Options Research, Inc., San Francisco, California, who provided our index options prices data base, and Blair Hull for advice. This research was supported by BARRA.Search for more papers by this author First published: July 1985 https://doi.org/10.1111/j.1540-6261.1985.tb04998.xCitations: 48 Read the full textAboutPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL Share a linkShare onEmailFacebookTwitterLinkedInRedditWechat ABSTRACT Index options became the most important traded contracts during their first year of existence. Two contracts, namely those on the S&P100 and the Major Markets Index, have a trading volume which typically surpasses the trading volume in all individual stock option contracts. In this paper, we examine the pricing of the options on the S&P100 and the Major Markets Index. Using intra-day prices, we find the options frequently violate the arbitrage boundary, put/call parity, and are substantially mispriced relative to theoretical values. Our results suggest that tests of option pricing models may be more difficult than previously realized due to nonsynchronous prices, even using "real-time" data from the exchanges. REFERENCES 1Jeremy Evnine and Andrew Rudd. "Stock Index Options: Preliminary Results." Paper presented at the Fall Seminar of the Berkeley Program in Finance, Silverado, California, September 1114, 1983. Google Scholar 2Kenneth French and Richard Roll. "Stock Return Variances: The Arrival of Information and Reaction of Traders." Working Paper, Graduate School of Management, UCLA, September 1984. Google Scholar 3Robert Geske and Kuldeep Shastri. "The Early Exercise of American Puts." Journal of Banking and Finance, forthcoming 1985. 10.1016/0378-4266(85)90018-4 Web of Science®Google Scholar 4Robert Jarrow and Andrew Rudd. Option Pricing. Homewood, IL: Dow Jones-Irwin, 1983. Web of Science®Google Scholar 5Robert Merton. "Theory of Rational Option Pricing." Bell Journal of Economics and Management Science 4 (Spring 1973), 141–83. 10.2307/3003143 Web of Science®Google Scholar 6Mark Rubinstein. "Nonparametric Tests of Alternate Option Pricing Models." Working Paper 117, Graduate School of Business Administration, University of California, Berkeley, October 1981. Google Scholar Citing Literature Volume40, Issue3July 1985Pages 743-756 ReferencesRelatedInformation