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Put-Call Parity and Arbitrage Bounds for Options on Grain Futures

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  • William W. Wilson
  • Hung-Gay Fung

Abstract

Many arbitrage opportunities have become available for market participants since the inception of trading in options. Central to many of these is the put-call parity relationship. If this condition is violated, arbitrage profits could be earned. This paper examines arbitrage possibilities between put and call options on grain futures using two different tests. One is a test of market efficiency over the duration of trading, and the other evaluates arbitrage bounds on individual trading days. In general, the results suggest that the options markets on grain futures are not completely efficient. However, violations varied substantially across contracts and through time.

Suggested Citation

  • William W. Wilson & Hung-Gay Fung, 1991. "Put-Call Parity and Arbitrage Bounds for Options on Grain Futures," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 73(1), pages 55-65.
    • Handle: RePEc:oup:ajagec:v:73:y:1991:i:1:p:55-65.
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    File URL: http://hdl.handle.net/10.2307/1242883
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    Cited by:

    1. Bruce A. Babcock & David A. Hennessy, 1996. "Input Demand under Yield and Revenue Insurance," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(2), pages 416-427.

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