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Put–call parity in a crypto option market — Evidence from Binance

Author

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  • Felföldi-Szűcs, Nóra
  • Králik, Balázs
  • Váradi, Kata

Abstract

This paper investigates a special and already well-documented topic within market efficiency, the put–call parity relationship. The analysis is carried out to the cryptocurrency options market, where market microstructure effects are treated. A new concept of the forward and backward PCP breaking for European options is introduced. This is examined in detail for Ethereum options listed on Binance using a one-second resolution data set. The results show that significant put–call parity violations remain even after controlling for bid–ask spread, trading costs and funding costs.

Suggested Citation

  • Felföldi-Szűcs, Nóra & Králik, Balázs & Váradi, Kata, 2024. "Put–call parity in a crypto option market — Evidence from Binance," Finance Research Letters, Elsevier, vol. 61(C).
    • Handle: RePEc:eee:finlet:v:61:y:2024:i:c:s1544612323012461
    DOI: 10.1016/j.frl.2023.104874
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    Keywords

    Cryptocurrency; Put–call parity; Market efficiency; Market maker; Binance;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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