Open AccessValuing call options on single stock futures: Does the put-call parity relationship hold in the South African derivatives market?
Author(s) -
Anton Biebuyck,
Johan H. Van Rooyen
Publication year - 2014
Publication title -
risk governance and control: financial markets and institutions
Language(s) - English
Resource type - Journals
eISSN - 2077-4303
pISSN - 2077-429X
DOI - 10.22495/rgcv4i3art4
Subject(s) - arbitrage , futures contract , financial economics , futures market , economics , parity (physics) , derivatives market , business , stock (firearms) , econometrics , geography , physics , archaeology , particle physics
This study attempts to determine whether this mispricing of financial derivatives is present in the South African derivatives market. This will be achieved by evaluating options for futures on individual stocks using a put-call parity ratio. The resulting theoretical fair value is compared with the actual market value for the three-year period (2009–2011). The results show that arbitrage opportunities are presented for selected stocks. Further research may include more stocks over a longer period to determine if there can be any model that can form the basis of an arbitrage trading strategy.