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    Please use this identifier to cite or link to this item: https://tkuir.lib.tku.edu.tw/dspace/handle/987654321/78832

    Title: Price discovery of Index options when futures are limited-locked - Evidence from Taiwan
    Authors: Lin, Yun-yung
    Contributors: 淡江大學財務金融學系
    Keywords: Price limits;price discovery;index futures;index options;Taiwan
    Date: 2012-07-25
    Issue Date: 2012-10-30 15:05:35 (UTC+8)
    Publisher: Victoria Island, Lagos: Academic journals
    Abstract: Brennan’s (1986) model suggests that price limit helps mitigate the default incentive on futures if information regarding the obscured price is not conveyed by relevant spot or option markets. This paper presents evidence for a strong information role of liquid index option during index futures limit-lock period in Taiwan. The implicit spot indexes recovered from the option premiums provided continuous, consistent and fairly accurate price discovery of the unobserved equilibrium index. The options assumed a greater proportion of information contribution under extreme market condition, indicating the migration of price discovery from futures to options. Results imply that price limits on index futures impair information efficiency but achieve little effect in controlling default risk.
    Relation: African Journal of Business Management 6(29), pp.8743-8756
    DOI: 10.5897/AJBM12.026
    Appears in Collections:[Graduate Institute & Department of Banking and Finance] Journal Article

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