✦ LIBER ✦

The profitability of index futures arbitrage: Evidence from bid-ask quotes

✍ Scribed by Bae, Kee-Hong; Chan, Kalok; Cheung, Yan-Leung

Book ID: 101222898
Publisher: John Wiley and Sons
Year: 1998
Tongue: English
Weight: 265 KB
Volume: 18
Category: Article
ISSN: 0270-7314
DOI: 10.1002/(sici)1096-9934(199810)18:7<743::aid-fut1>3.0.co;2-4

No coin nor oath required. For personal study only.

✦ Synopsis

Previous studies investigated the profitability of stock index futures based on transaction price data, and could overstate the frequency of arbitrage opportunities and size of arbitrage profits. This article obtains a data base for the Hong Kong index futures and index options market that contains both real-time transaction prices and bid-ask quotes; the article further examines the bias of identifying arbitrage opportunities based on transaction prices. The article finds the percentage of observations violating no-arbitrage bounds is significantly reduced when bid-ask quotes are employed instead of transaction prices. This suggests studies that implement arbitrage strategies based on transaction prices employ prices from the wrong side of the We

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