Do the options markets really overreact?

Article Abstract:

An alternate set of tests to those used by Stein is applied to options markets and results of this study indicate no overreaction for index options in the market. A model is presented for reexamination of Stein's findings of the relationship of changed in short-term volatilities and implied volatilities of long-term Standard & Poor 100 index options. A structural change in linkage of short and long maturity implied volatilities is suggested by results and a simple mean reverting model may be inadequate for characterization of time series properties.

Research, Standard and Poor's 100 Stock Price Index, Stein, J.

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Is the Australian wool futures market efficient as a predictor of spot prices?

Article Abstract:

The Australian wool futures market was determined to be capable of accurately gauging the future spot prices of wool for only a six-month period. The futures market, tested by applying cointegration techniques on the Law of One Price, can still be used by woolgrowers in assessing the right time to sell their produce as long as it falls within the six-month efficiency limit. The testing procedure is also capable of estimating the adjustment that futures prices will take.

Securities and Commodity Exchanges, Commodity Exchanges, Textile and Fabric Finishing Mills, Broadwoven fabric mills, wool, Wool Woven Goods, Analysis, Australia, Textile industry, Commodity futures, Spot market, Wool fabrics

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Currency barrier option pricing with mean reversion

Article Abstract:

Comparative analysis of barrier option model and Black-Scholes model with relation to mean-reverting lognormal process (MRL) is presented. Effects of MRL on hedge parameters are also analyzed.

Management dynamics, Hong Kong, Management, Evaluation, Foreign exchange, Foreign exchange rates, Company business management

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