A Research on Arbitrage Opportunity and Efficiency of Chinese Option Markets

Xiyan Mao ； Xun Gong ； Mingyi Chang

《Frontiers in Economics and Management》 2卷2期 (2021/02) Pp. 1-16

https://doi.org/10.6981/FEM.202102_2(2).0001

摘要

Different types of option arbitrage including lower/upper bound violations, put-call parity violations and convexity violations exist widely among different option markets. To get a better understanding of the relatively newly developed Chinese option markets, arbitrages among CSI 300 index options are analyzed under different classification methods such as moneyness, time to maturity and date when the trading takes place. In addition, Delta-hedge strategy is applied to see whether it is profitable under CSI 300 index option markets. Research shows that the underlying option market is not efficient that huge amount of arbitrage opportunity occurs. The violation rate of put-call parity is extremely high. Significant arbitrage opportunities can be exploited if the trader focuses on in-the-money options and long-term options. Seeking to trade options of which the underlying security is suffering a downward trend might also be potentially beneficial. However, Delta-hedge strategy is likely to provide a loss.

關鍵字

Option Arbitrage ； Delta-Hedge Strategy ； Chinese Option Market ； Market Efficiency

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