Exercising of Options in the Australian Options Market

R. L. Brown and K. A. Rainbow
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R. L. Brown: Monash University
K. A. Rainbow: Australian United Corporation, Melbourne. We are indebted to Mr. P.C. Small and his staff at the Options Clearing House (Sydney) for providing essential unpublished data and to R.J. Longair for helpful comments.

Australian Journal of Management, 1981, vol. 6, issue 1, 1-22

Abstract: Conditions defining rational and irrational exercising of options are presented and explained. These conditions are tested empirically by studying actual exercises in the Australian Options Market. It is found that two weak conditions are confirmed but the evidence on two strong conditions is mixed. Although most exercising appears to be consistent with the strong conditions, a significant number of exercises appear to violate them. Factors explaining these violations are not examined in detail, but it is suggested that transaction costs may be important.

Keywords: EXERCISE OF OPTIONS; STOCK OPTIONS; TRANSACTION COSTS (search for similar items in EconPapers)
Date: 1981
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:ausman:v:6:y:1981:i:1:p:1-22

DOI: 10.1177/031289628100600101

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