Short-sales restrictions and efficiency of emerging option market: A study of Indian stock index options
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Author(s)
Gupta, R
Jithendranathan, T
Griffith University Author(s)
Year published
2010
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Using Indian index options, this paper investigates the effect of short-sales restrictions on the pricing and informational efficiency of derivative markets in emerging countries. Results indicate that there are violations of the put-call parity as well as the boundary conditions, indicating pricing inefficiency in the derivative market when there are restrictions on short-sales. However, volume-volatility relationship of the Indian market is similar to that of the developed markets which suggests that investors in India are using the derivative market for efficient hedging strategies.Using Indian index options, this paper investigates the effect of short-sales restrictions on the pricing and informational efficiency of derivative markets in emerging countries. Results indicate that there are violations of the put-call parity as well as the boundary conditions, indicating pricing inefficiency in the derivative market when there are restrictions on short-sales. However, volume-volatility relationship of the Indian market is similar to that of the developed markets which suggests that investors in India are using the derivative market for efficient hedging strategies.
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Journal Title
International Research Journal of Finance and Economics
Volume
2010
Issue
46
Publisher URI
Copyright Statement
© 2010 EuroJournals Publishing, Inc. The attached file is reproduced here in accordance with the copyright policy of the publisher. Please refer to the journal's website for access to the definitive, published version.
Subject
Applied economics
Econometrics
Banking, finance and investment
Investment and risk management