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Intra-daily put call parity in the PHLX currency options market

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Intra-daily put call parity in the PHLX currency options market

El-Mekkaoui, Mazen (1997) Intra-daily put call parity in the PHLX currency options market. Masters thesis, Concordia University.

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Abstract

This study examines the Put-Call Parity efficiency of the PHLX currency options market for the Deutsche Mark for the period between 30 September 1992 to 1 October 1993. Using a large database of currency option data, a sample of 7968 American and European put and call options are tested for the presence of reversal and conversion profit opportunities. Data from two data providers and eleven different exchange rate measures are used. Exchange rates recorded in the PHLX market surveillance tape and originally reported by Telerate are used in conjunction with more frequently observed exchange rate data collected by Olsen & Associates and reported by Reuters. The presence of positive PCP deviations is examined with transactions costs and specifically taking into account simultaneity of the data. Censored regressions are used to determine the causes of these positive PCP deviations. The results from all exchange rate measures indicate that less than 3.571% of the sample result in profitable opportunities. This is true for all strategies except for the European conversion. Upon further examination, this result is shown to be sample specific. A degree of intra-daily and intra-weekly seasonality was found in the number of positive deviations from Put-Call Parity. This is explained by thin markets and high spreads. The conclusion is drawn that the prices of PHLX Deutsche Mark currency options for this period are consistent with Put-Call Parity Theorem.

Divisions:Concordia University > John Molson School of Business
Item Type:Thesis (Masters)
Authors:El-Mekkaoui, Mazen
Pagination:x, 95 leaves : ill. ; 29 cm.
Institution:Concordia University
Degree Name:Theses (M.Sc.Admin.)
Program:Faculty of Commerce and Administration
Date:1997
Thesis Supervisor(s):Flood, Mark D.
ID Code:178
Deposited By:Concordia University Libraries
Deposited On:27 Aug 2009 13:10
Last Modified:08 Dec 2010 10:13
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