Abstract
This article investigates price disagreements between actual and options-implied futures prices by considering option moneyness. Out-of-the-money (OTM) options trading induces price disagreements more frequently than at-the-money (ATM) options trading. Examining price adjustments to eliminate disagreements, we find that the futures (options) market tends to move less (more) for OTM option disagreements than ATM option disagreements, suggesting that the price dynamics of OTM options are less informative and noisier than that of ATM options.
| Original language | English |
|---|---|
| Pages (from-to) | 192-196 |
| Number of pages | 5 |
| Journal | Applied Economics Letters |
| Volume | 25 |
| Issue number | 3 |
| DOIs | |
| State | Published - 6 Feb 2018 |
Keywords
- KOSPI200 futures and options
- price adjustment
- price disagreement