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Arbitraging American Gold Spot and Futures Options

Author

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  • Ogden, Joseph P
  • Tucker, Alan L
  • Vines, Timothy W

Abstract

This study empirically tests rational pricing conditions applicable to American gold spot and futures options. A number of ancillary pricing relations also are tested. Transactions data supplied by the Montreal Stock Exchange and the New York Commodity Exchange are used in these tests. Arbitrage trading strategies designed to exploit violations of these conditions also are provided. The results indicate potential intermarket inefficiency: a substantial number of violations of a condition applicable to call options are found, and most of these violations are sufficient in magnitude to cover the relevant transaction costs of arbitrage. Copyright 1990 by MIT Press.

Suggested Citation

  • Ogden, Joseph P & Tucker, Alan L & Vines, Timothy W, 1990. "Arbitraging American Gold Spot and Futures Options," The Financial Review, Eastern Finance Association, vol. 25(4), pages 577-592, November.
    • Handle: RePEc:bla:finrev:v:25:y:1990:i:4:p:577-92
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    Cited by:

    1. Narayan, Paresh Kumar & Narayan, Seema & Zheng, Xinwei, 2010. "Gold and oil futures markets: Are markets efficient?," Applied Energy, Elsevier, vol. 87(10), pages 3299-3303, October.
    2. Lian, Yu-Min & Liao, Szu-Lang & Chen, Jun-Home, 2015. "State-dependent jump risks for American gold futures option pricing," The North American Journal of Economics and Finance, Elsevier, vol. 33(C), pages 115-133.

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