An Empirical Test of Efficiency of Exchange-Traded Currency Options in India

Aparna Bhat () and Kirti Arekar ()
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Aparna Bhat: K.J. Somaiya Institute of Management Studies and Research
Kirti Arekar: K.J. Somaiya Institute of Management Studies and Research

Business and Economics Research Journal, 2015, vol. 6, issue 4, 1-17

Abstract: The objective of this paper is to examine efficiency of the exchange-traded currency options market in India. Put-call-futures parity for the USD-INR currency options is studied by analyzing daily closing prices of options and futures for thirty two months on the National Stock Exchange. The study reveals frequent violations of the put-call-futures parity creating significant arbitrage opportunities. The pattern of mispricing varies when examined for time to maturity, option moneyness, liquidity and volatility of the underlying asset. These observations are consistent with those of studies of other young markets.

Keywords: Put-call parity; efficient markets; currency options (search for similar items in EconPapers)
JEL-codes: G13 G14 (search for similar items in EconPapers)
Date: 2015
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