The Box Spread Arbitrage Conditions: Theory, Tests, and Investment Strategies

Aimee Gerbarg Ronn and Ehud I Ronn

The Review of Financial Studies, 1989, vol. 2, issue 1, 91-108

Abstract: This paper develops and tests arbitrage bounds for a combination of two option spread positions known as a box spread. This strategy involves the simultaneous use of four options and creates a position that is equivalent to riskless lending. The no-arbitrage conditions are compared to existing arbitrage bounds and are tested using Chicago Board Options Exchange data. Article published by Oxford University Press on behalf of the Society for Financial Studies in its journal, The Review of Financial Studies.

Date: 1989
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