An Empirical Analysis of Arbitrage among Taiwan Stock Index and Its Derivatives Markets

• Main Authors: Chung_Nan Wang, 王中南
• Other Authors: Nen-Jing Chen
• Format: Others
• Language: zh-TW
• Published: 2006
• Online Access: http://ndltd.ncl.edu.tw/handle/12975038277702039054

碩士 === 輔仁大學 === 金融研究所 === 94 === This research utilizes the intra-day data from January 2nd 2005 through December 31st 2005 to analyze the arbitrage opportunities and profits among the Taiwan stock index futures, options, and Taiwan Exchange Traded Fund (ETF) markets and the market efficiency. The hold-until-maturity arbitrage analysis with trading costs is conducted based on the Cost-of-Carry theory, Put and Call Price Lower Bound, Put-Call Parity, Put-Call-Futures Parity, Put/Call Spread, Box Spread and Butterfly Spread models. The ex-post results show that the arbitrage opportunities and profits of the arbitrage strategies do not have a significant downward trend on the time axis. This indicates that the market efficiency is not improved with time. Results also show that only arbitrage strategies involve cash trading can generate an average profit of over NT$1,000. The intra-day distribution of ex-post arbitrage opportunities and profits is analyzed by dividing daily trading hours into about 20 15-minute intervals. A U or L-shape distribution is observed which suggests that higher arbitrage opportunities and profits exist during market opening and closing periods. Ex-ante simulation is performed by taking into consideration the possible execution time lags for the arbitrage trade. In general, delays in executions have negative effects on the arbitrage opportunities and arbitrage profit. Only arbitrage strategies involves cash trading can generate positive average and total profits. The results of this study provide valuable suggestions on arbitrage trading for investors.