Influence of transaction costs on foreign exchange option contracts: intra-daily tests

Hoque, Ariful and Manzur, Meher and Poitras, Geoffrey (2010) Influence of transaction costs on foreign exchange option contracts: intra-daily tests. International Journal of Banking and Finance, 7 (2). pp. 1-18. ISSN 1675-7227

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Abstract

This paper tests the impact of transactions cost specification on deviations from lower boundary and put-call parity properties. Using PHLX traded foreign exchange options, prices for puts and calls are matched to the nearest five minutes. The results indicate how boundaries on the arbitrage profit function determined by alternative measures of transactions costs can impact the interpretation of deviations from distribution free properties of options such as put-call parity.


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Item Type: Article (Commonwealth Reporting Category C)
Refereed: Yes
Item Status: Live Archive
Depositing User: Dr Ariful Hoque
Faculty / Department / School: Historic - Faculty of Business - School of Accounting, Economics and Finance
Date Deposited: 12 Jan 2011 12:33
Last Modified: 03 Jul 2013 00:03
Uncontrolled Keywords: put-call parity; market efficiency; arbitrage; European options
Fields of Research (FOR2008): 15 Commerce, Management, Tourism and Services > 1502 Banking, Finance and Investment > 150201 Finance
14 Economics > 1402 Applied Economics > 140210 International Economics and International Finance
14 Economics > 1402 Applied Economics > 140212 Macroeconomics (incl. Monetary and Fiscal Theory)
Socio-Economic Objective (SEO2008): B Economic Development > 90 Commercial Services and Tourism > 9001 Financial Services > 900199 Financial Services not elsewhere classified
URI: http://eprints.usq.edu.au/id/eprint/8763

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