We document widespread violations of stochastic dominance in the one-month S&P 500 index options market over the period 1986-2002. These violations imply that a trader can improve her expected utility by engaging in a zero-net-cost trade. We allow the market to be incomplete and also imperfect...

In this paper, we introduce two classes of indices which can be used to measure the market perception concerning the degree of dependency that exists between a set of random variables, representing different stock prices at a xed future date. The construction of these measures is based on the...

This paper explores the impact of volatility estimation methods on theoretical option values based upon the Black-Scholes-Merton (BSM) model. Volatility is the only input used in the BSM model that cannot be observed in the market or a priori determined in a contract. Thus, properly calculating...

The aim of the present paper is to provide evidence on the internal market efficiency of the Italian index option market. To this end a model-free approach is taken, whereby strategies involving only options are tested by means of a high frequency dataset covering the period 1 September – 31...

The birth and success of index option markets have fostered empirical research on their efficiency. While most of the literature focuses on North American markets, studies on European markets are still limited. The aim of the present paper is to provide further evidence on a European market, the...

We document widespread violations of stochastic dominance in the one-month S&P 500 index options market over the period 1986-2002. These violations imply that a trader can improve her expected utility by engaging in a zero-net-cost trade. We allow the market to be incomplete and also imperfect...

The goal of this work is to check that there are no arbitrage opportunities in the CBOE market for S&P500 options and to extract from these options’ quotes the state-price density consistent with the Merton model. The structure of the article is as follows: in Section 2 we examine the...

In this paper, we introduce two classes of indices which can be used to measure the market perception concerning the degree of dependency that exists between a set of random variables, representing di¤erent stock prices at a …xed future date. The construction of these measures is based on the...