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Put-Call Parity: Evidence From the Australian Options Market

Author

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  • Stephen L. Taylor

    (Department of Accounting, University of Sydney, Australia.)

Abstract

This study tests the relative prices of exchange traded puts and calls. Some evidence of violation of the parity conditions are found, particularly in the period immediately prior to expiry of the options and in instances where the exercise price exceeds the market price of the underlying stock. But violations of this type are difficult to exploit after allowing for possible transaction costs. Although transaction costs cannot explain the existence of these violations, they do provide a rationale for their non-exploitation.

Suggested Citation

  • Stephen L. Taylor, 1990. "Put-Call Parity: Evidence From the Australian Options Market," Australian Journal of Management, Australian School of Business, vol. 15(1), pages 203-216, June.
    • Handle: RePEc:sae:ausman:v:15:y:1990:i:1:p:203-216
    DOI: 10.1177/031289629001500109
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    References listed on IDEAS

    as
    1. Merton, Robert C., 1976. "Option pricing when underlying stock returns are discontinuous," Journal of Financial Economics, Elsevier, vol. 3(1-2), pages 125-144.
    2. Klemkosky, Robert C & Resnick, Bruce G, 1979. "Put-Call Parity and Market Efficiency," Journal of Finance, American Finance Association, vol. 34(5), pages 1141-1155, December.
    3. Stoll, Hans R, 1969. "The Relationship between Put and Call Option Prices," Journal of Finance, American Finance Association, vol. 24(5), pages 801-824, December.
    4. Merton, Robert C, 1973. "The Relationship Between Put and Call Option Prices: Comment," Journal of Finance, American Finance Association, vol. 28(1), pages 183-184, March.
    5. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-654, May-June.
    6. Smith, Clifford Jr., 1976. "Option pricing : A review," Journal of Financial Economics, Elsevier, vol. 3(1-2), pages 3-51.
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    Cited by:

    1. Zhang, Huiming & Watada, Junzo, 2019. "An analysis of the arbitrage efficiency of the Chinese SSE 50ETF options market," International Review of Economics & Finance, Elsevier, vol. 59(C), pages 474-489.

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    More about this item

    Keywords

    PUT OPTION; CALL OPTION; PARITY;
    All these keywords.

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