Transaction cost discovery by decomposition of the error term: a bootstrapping approach

Article

Hoque, Ariful. 2011. "Transaction cost discovery by decomposition of the error term: a bootstrapping approach." The International Journal of Business and Finance Research. 5 (1), pp. 113-121.
Article Title

Transaction cost discovery by decomposition of the error term: a bootstrapping approach

ERA Journal ID31202
Article CategoryArticle
Authors
AuthorHoque, Ariful
Journal TitleThe International Journal of Business and Finance Research
Journal Citation5 (1), pp. 113-121
Number of Pages9
Year2011
Place of PublicationUnited States
ISSN1931-0269
2157-0698
Web Address (URL)http://www.theibfr.com/ijbfr.htm
Abstract

There is agreement regarding the fundamental role of transaction costs in determining currency options market efficiency. However, the estimation of transaction costs in thei relationship is controversial. In this study, a bootstrapping approach is adapted to decompose the error term of the put-call parity regression analaysis in order to estimate transaction costs. This robust transaction cost calculation will be valuable to traders and researchers as it eliminates dependence on crude proxies for transaction costs.

Keywordstransaction costs, error term decomposition, put-call parity, serial correlation, ARCH
ANZSRC Field of Research 2020350202. Finance
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Byline AffiliationsSchool of Accounting, Economics and Finance
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