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Arbitraging American Gold Spot and Futures Options
Author(s) -
Ogden Joseph P.,
Tucker Alan L.,
Vines Timothy W.
Publication year - 1990
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/j.1540-6288.1990.tb01299.x
Subject(s) - futures contract , arbitrage , spot contract , transaction cost , inefficiency , economics , exploit , financial economics , database transaction , stock exchange , econometrics , finance , microeconomics , computer science , database , computer security
This study empirically tests rational pricing conditions applicable to American gold spot and futures options. A number of ancillary pricing relations also are tested. Transactions data supplied by the Montreal Stock Exchange and the New York Commodity Exchange are used in these tests. Arbitrage trading strategies designed to exploit violations of these conditions also are provided. The results indicate potential intermarket inefficiency: a substantial number of violations of a condition applicable to call options are found, and most of these violations are sufficient in magnitude to cover the relevant transaction costs of arbitrage.