Short-sales restrictions and efficiency of emerging option market: A study of Indian stock index options
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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.
International Research Journal of Finance and Economics
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Investment and Risk Management