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A Study on the Efficiency of the Market for Dutch Long Term Call Options

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  • de Roon, F.A.

    (Tilburg University, School of Economics and Management)

  • Veld, C.H.

    (Tilburg University, School of Economics and Management)

  • Wei, J.

Abstract

The efficiency of the market for 5-year call options which are traded on the European Options Exchange in Amsterdam is investigated. Both delta, delta-vega and delta-gamma neutral arbitrage portfolios are studied. No serious inefficiencies in the market for longterm call options are detected. This result is in line with previous studies on different kinds of call options and warrants. The results for the delta-vega and delta-gamma neutral arbitrage strategies differ from the results of the simple delta-neutral strategies in two ways: they lead to positive results more often, but the variance of these results is also larger.
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Suggested Citation

  • de Roon, F.A. & Veld, C.H. & Wei, J., 1996. "A Study on the Efficiency of the Market for Dutch Long Term Call Options," Other publications TiSEM 6d44d9a4-a512-4921-958a-3, Tilburg University, School of Economics and Management.
    • Handle: RePEc:tiu:tiutis:6d44d9a4-a512-4921-958a-3cbe2a56d8c9
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    References listed on IDEAS

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    1. Evnine, Jeremy & Rudd, Andrew, 1985. "Index Options: The Early Evidence," Journal of Finance, American Finance Association, vol. 40(3), pages 743-756, July.
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    7. Phillips, Susan M. & Smith, Clifford Jr., 1980. "Trading costs for listed options : The implications for market efficiency," Journal of Financial Economics, Elsevier, vol. 8(2), pages 179-201, June.
    8. Cox, John C. & Ross, Stephen A. & Rubinstein, Mark, 1979. "Option pricing: A simplified approach," Journal of Financial Economics, Elsevier, vol. 7(3), pages 229-263, September.
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    Cited by:

    1. Andreou, Panayiotis C. & Charalambous, Chris & Martzoukos, Spiros H., 2008. "Pricing and trading European options by combining artificial neural networks and parametric models with implied parameters," European Journal of Operational Research, Elsevier, vol. 185(3), pages 1415-1433, March.
    2. Pilar Corredor Casado & Rafael Santamaría, "undated". "La estructura temporal de las volatilidades implícitas en la opción sobre el Ibex-35," Studies on the Spanish Economy 04, FEDEA.

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