An empirical test of 'put call parity'
In this article, we examined the validity of 'Put Call Parity' (PCP) in the Israeli stock market. Estimating the parameters for the PCP equation, we reject the validity of PCP with a 100% confidence level. The estimated PCP equation includes a significant intercept that points to the possibility of having arbitrage opportunities. Measuring the profit rate for portfolios that include options with various exercise prices, we find a potential profit of about 3%-3.4% in all cases.
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Volume (Year): 21 (2011)
Issue (Month): 22 ()
Pages: 1661-1664
| Handle: | RePEc:taf:apfiec:v:21:y:2011:i:22:p:1661-1664 |
| DOI: | 10.1080/09603107.2011.589806 |
| Contact details of provider: | Web page: http://www.tandfonline.com/RAFE20
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| Order Information: | Web: http://www.tandfonline.com/pricing/journal/RAFE20 |
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