The Determinants of the Time to Efficiency in OptionsMarkets: A Survival Analysis Approach

Fabrice Riva () and Laurent Deville
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Fabrice Riva: DRM - Dauphine Recherches en Management - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique

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Abstract: This paper examines the determinants of the time it takes for an index options marketto be brought back to efficiency after put-call parity deviations, using intraday transactionsdata from the French CAC 40 index options over the August 2000 – July 2001 period. Weaddress this issue through survival analysis which allows us to characterize how differencesin market conditions influence the expected time before the market reaches the no-arbitragerelationship. We find that maturity, trading volume as well as trade imbalances in call andput options, and volatility are important in understanding why some arbitrage opportunitiesdisappear faster than others. After controlling for differences in the trading environnement,we find a strong and negative relationship between the existence of ETFs on the index andthe time to efficiency.

Keywords: Index Options; Market efficiency; Survival Analysis; Exchange Traded Funds.; Exchange Traded Funds (search for similar items in EconPapers)
Date: 2006-05-11
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Published in Journées de l'AFSE 2006, May 2006, Strasbourg, France

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Related works:
Working Paper: The Determinants of the Time to Efficiency in Options Markets: A Survival Analysis Approach (2006)
Working Paper: The Determinants of the Time to Efficiency in Options Markets: A Survival Analysis Approach (2006)
Working Paper: The Determinants of the Time to Efficiency in Options Markets: A Survival Analysis Approach (2005)
Working Paper: The Determinants of the Time to Efficiency in Options Markets: A Survival Analysis Approach (2005)
Working Paper: The Determinants of the Time to Efficiency in Options Markets: A Survival Analysis Approach (2004)
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