Skip to main content
SpringerLink
Log in

An Empirical Test of the OPM Based on EOE-Transactions Data

  • Conference paper
A Reappraisal of the Efficiency of Financial Markets

Part of the book series: NATO ASI Series ((NATO ASI F,volume 54))

Abstract

Based on 4 months of EOE-transactions data of the 14 stock options, the option pricing model is tested on its validity. Differences between model and market prices are analyzed through the behaviour of the implied volatility. One important measurement error caused by the options bid-ask spread explains part of the differences in implied volatility per stock. Further, biases with respect to the time to maturity, the exercise price and dividend payments are found in addition to a time dependency of the implied volatility.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Log in via an institution
Chapter
USD 29.95
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
eBook
USD 84.99
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
Softcover Book
USD 109.99
Price excludes VAT (USA)
  • Compact, lightweight edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  • Beckers, S., 1981, Standard Deviations Implied in Option Prices as Predictors of Future Stock Price Variability, Journal of Banking and Finance 5, 363–381.

    Article  Google Scholar 

  • Beckers, S., 1984, On the Efficiency of the Gold Options Market, Journal of Banking and Finance 8, 459–470.

    Article  Google Scholar 

  • Bhattacharya, M., 1980, Empirical Properties of the Black-Scholes Formula under Ideal Conditions, Journal of Financial and Quantitative Analysis 15, 1081–1105.

    Article  Google Scholar 

  • Bhattacharya, M., 1987, Price Changes of Related Securities: The Case of Stock Call Options and Stocks, Journal of Financial and Quantitative Analysis 1, 1–15.

    Google Scholar 

  • Bjorck, A. and G. Dahlquist, 1974, Numerical Methods, Prentice Hall.

    Google Scholar 

  • Black, F. and M. Scholes, 1973, The Pricing of Options and Corporate Liabilities, Journal of Political Economics 81, 637–659.

    Article  Google Scholar 

  • Blomeyer, E.C. and R.C. Klemkosky, 1983, Test of Market Efficiency for American Call Options, in M. Brenner, ed., Option Pricing, Lexington, Mass.: D.C. Heath, 101–121.

    Google Scholar 

  • Brenner, M. and D. Calai, 1984, On Measuring the Risk of Common Stocks Implied by Options Prices:A Note, Journal of Financial and Quantitative Analysis 19, 403–412.

    Article  Google Scholar 

  • Dickinson, J.P. and M.J. Nisbet, 1987, Pricing in the London Traded Options Markt: An Empirical Study, University of Glasgow Workingpaper, presented at the EFA in Madrid.

    Google Scholar 

  • Calai, D., 1977, Tests of Market Efficiency of the Chicago Board Option Exchange, Journal of Business 50, 167–197.

    Article  Google Scholar 

  • Calai, D., 1983, A Survey of Empirical Tests of Option Pricing Models, in M. Brenner, ed., Option Pricing, Lexington, Mass.: D.C. Heath, 45–80.

    Google Scholar 

  • Geske, R., 1977, The Valuation of Corporate Liabilities as Compound Options, Journal of Financial and Quantitative Analysis 4, 541–552.

    Article  Google Scholar 

  • Ceske, R. and R. Roll, 1984, On Valuing American Call options with the Black-Scholes European Formula, Journal of Finance 39, 443–455.

    Article  Google Scholar 

  • Hogg, R.V. and A.T. Craig, 1973, Introduction to Mathematical Statistics, 3rd edition, Collier MacMillan Publishers London.

    Google Scholar 

  • MacBeth, J. and L. Merville, 1979, An Empirical Examination of the Black-Scholes Call Option Pricing Model, Journal of Finance 34, 1173–1186.

    Article  Google Scholar 

  • Maddala, G.S.,1977, Econometrics, McGraw-Hill, N.Y..

    Google Scholar 

  • Phillips, S.M. and C.W. Smith, 1980, Trading Costs for Listed Options, Journal of Financial Economics 8, 179–201.

    Article  Google Scholar 

  • Rubinstein, M., 1985, Nonparametric Tests of Alternative Option Pricing Models Using all Reported Trades and Quotes on the 30 Most Active CBOE Option Classes from August 23, 1976 through August 31, 1978 Journal of Finance 2, 455–480.

    Google Scholar 

  • Sterk, W.E., 1983, Comparative Performance of the Black-Scholes and the Roll-Ceske-Whaley Option Pricing Models, Journal of Financial and Quantitative Analysis 3, 345–354.

    Article  Google Scholar 

  • Van der Hilst, J., 1980, Marktefficiency op de EOE te Amsterdam, F.J. Ballendux e.a., red., Financiering en Belegging, stand van zaken anno 1980, Erasmus Universiteit Rotterdam, 128–138.

    Google Scholar 

  • Whaley, R.E., 1982, Valuation of American Call Options on Dividend-Paying Stocks, Journal of Financial Economics 10, 29–58.

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Department of Finance, Erasmus University, P.O.Box 1738, 3000 DR, Rotterdam, The Netherlands

    Angelien Kemna

Authors
  1. Angelien Kemna
    View author publications

    You can also search for this author in PubMed Google Scholar

Editor information

Editors and Affiliations

  1. Faculty of Engineering, University of Porto, Rua dos Bragas, 4099, Porto Codex, Portugal

    Rui M. C. Guimarães

  2. School of Management, University of Lancaster, LA1 4YX, Lancaster, UK

    Brian G. Kingsman  & Stephen J. Taylor  & 

Rights and permissions

Reprints and permissions

Copyright information

© 1989 Springer-Verlag Berlin Heidelberg

About this paper

Cite this paper

Kemna, A. (1989). An Empirical Test of the OPM Based on EOE-Transactions Data. In: Guimarães, R.M.C., Kingsman, B.G., Taylor, S.J. (eds) A Reappraisal of the Efficiency of Financial Markets. NATO ASI Series, vol 54. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-74741-0_46

Download citation

  • DOI: https://doi.org/10.1007/978-3-642-74741-0_46

  • Publisher Name: Springer, Berlin, Heidelberg

  • Print ISBN: 978-3-642-74743-4

  • Online ISBN: 978-3-642-74741-0

  • eBook Packages: Springer Book Archive

Publish with us

Policies and ethics

Search

Navigation