Empirical Study of Relative Implied-Volatility Arbitrage Strategy with Taiwan Stock Index Options

• Main Authors: Wang, Shin-Yi, 王欣怡
• Other Authors: Chung, Hui-Min
• Format: Others
• Language: zh-TW
• Published: 2011
• Online Access: http://ndltd.ncl.edu.tw/handle/87025233395374961607

碩士 === 國立交通大學 === 財務金融研究所 === 99 === Implied volatility has been used in arbitrage strategies of options for a long time but only for different contracts of one spot asset. Ammann and Herriger (2002) investigated the efficiency of markets as to the relative pricing of similar risk by using relative volatilities of options on highly correlated indexes and statistical arbitrage strategy to profit from potential mispricings. In this study, we follow the method derived by Ammann and Herriger, and try to examine whether it is suitable for Taiwan index options market or not, that is, to find out the potential arbitrage opportunities in Taiwan index option market with relative implied volatility and to take transaction cost into consideration. We used TXO, TEO and TFO as our sample, and derived their relative relationship of implied volatility from corresponding stock indexes. After exercising our trading strategy, we found out that there existed arbitrage opportunities in Taiwan index option market but the results didn’t show positive returns in all pairs of our index pair samples, so we cannot conclude that the market is not efficient.