An Arbitrage Study on TAIEX Index, Futures and Options
Date Issued
2009
Date
2009
Author(s)
Ing, Wen-Chiun
Abstract
With transaction cost, there’s almost no arbitrage opportunity exists between TAIEX options and futures for non-market makers during the data period of Jan., 2009 to May, 2009.or ETF 50, futures and TAIEX index, ETF 50-Futures and ETF 50-TAIEX index do not have cointegration relationship for the period of Jun. 30, 2003 to Jun. 30, 2009. However, futures-TAIEX index, ETF 50-Futures and ETF 50-TAIEX index all exist cointegration relationship at 1% significant level for the period of Jan. 1, 2007 to Jun. 30, 2009. ETF 50, futures and TAIEX index all have Granger causality relationship except Future-TAIEX index, Jan. 2007 to Jun. 2009.inear regression was employed for the best substitute ratio. One unit price of TAIEX futures changes will cause 32 units price change of ETF 50. For arbitrage trade, one contract of futures has to be hedged with 32 contracts of ETF 50.erforming arbitrage trading from Apr. to Jun., 2009, an annual profit rate of around 16% was obtained. If leverage is deployed, then the annual profit rate may go up to ~24%.
Subjects
index options
index futures
ETF
arbitrage
Type
thesis
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