Influence of transaction costs on foreign exchange option contracts: intra-daily tests

Article


Hoque, Ariful, Manzur, Meher and Poitras, Geoffrey. 2010. "Influence of transaction costs on foreign exchange option contracts: intra-daily tests." International Journal of Banking and Finance. 7 (2), pp. 1-18.
Article Title

Influence of transaction costs on foreign exchange option contracts: intra-daily tests

ERA Journal ID41751
Article CategoryArticle
AuthorsHoque, Ariful (Author), Manzur, Meher (Author) and Poitras, Geoffrey (Author)
Journal TitleInternational Journal of Banking and Finance
Journal Citation7 (2), pp. 1-18
Number of Pages18
Year2010
Place of PublicationGold Coast, Australia
ISSN1675-7227
Web Address (URL)http://epublications.bond.edu.au/cgi/viewcontent.cgi?article=1086&context=ijbf
Abstract

This paper tests the impact of transactions cost specification on deviations from lower boundary and put-call parity properties. Using PHLX traded foreign exchange options, prices for puts and calls are matched to the nearest five minutes. The results indicate how boundaries on the arbitrage profit function determined by alternative measures of transactions costs can impact the interpretation of deviations from distribution free properties of options such as put-call parity.

Keywordsput-call parity; market efficiency; arbitrage; European options
ANZSRC Field of Research 2020350202. Finance
380110. International economics
380112. Macroeconomics (incl. monetary and fiscal theory)
Byline AffiliationsSchool of Accounting, Economics and Finance
Curtin University of Technology
Simon Fraser University, Canada
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