SHERREART DT Arbitrage Opportunity Analysis of TWSI Index Options ERAGE HFK BS AE PAR ABS C.Y, ChiangLin and F. M. Chung, Institute of Finance and Information, National Kaohsiung Univei ity of Applied Science HE GER TARE DRS Hk: AAMT Po RAE B+ SBTALEMH RHR RRB AL HSERMA HO: RP MLRE OR GBR IR RH PF RAR AB ME EF AR (XO) - AGH ARR G HH EHR A EAH ee ARRAS RRMA E A RRRE FAR ROE GHEFREG SAE EAT AS AEE HI 0 RE RMT + GAR RARE - AERA RAT BARAT FE + BRAS 5K By AEG RES AN Re ET > MSOF: KE. SHR BAL A Abstract Since Chicago Board Options Exchange introduced the first index option contract in 1983, index options have played a significant role in financial markets. Though the trading history of Taiwan Weighted Stock Index Option (TXO) is relatively short, the option has become one of the most successful innovative instruments over the past few years, as its high trading volume indicates. Using various no arbitrage conditions, including call and put spreads, call and put butterfly spreads, and box spreads, this study examines the efficiency of Taiwan index options market, The test results indicate that the option market is rather efficient. The arbitrage opportunities significantly diminish when transaction costs are considered, ‘Transaction cost seems a critical factor influencing the appearance of arbitrage opportunities. Keywords: Market efficieney, Taiwan weighted stock index option, Arbitrage, Spread-—. # ERASER RD RT AAR AT RR TEER RAEI TRARG MSS OKT PEMA FARR SANFAM RG HLA GRTEALAA ROLE ELM MERLE TEMBIH KP EAR By BG He Ge EG Ae eH pa a a PEER ROB Pop RANA EAR He #3 4) (TNO)GR F ff 48 6 45 SARA) = AE Ar RAR GH AE a BE BM Hae CRRA RRR | RARE | PARR ST GHERRRE GANAS UTM SERRA PHA AE © PRAM HAM (arbitrage) 3 4a HH vba Bh AB Bj Sh PAM He a Ae PL IE AVS D> RAL > RARE TWN He te AR AOS Boh» PD ae A te Bk ENR-BRBBRAMROR THA BARE RL EAR ER BR + BY Ay — 4) BA RSA a — AA a = HA AG He a OE RAERRO GH THEMARMAD - HME: FRESH BAS > AB ART BAA BY I Ba A ARS TE MR AR + BLU de BS Sh a de RT RHENORT ER > HR GAR (o TPM + 2003) RANGER THEA EOE A BE Kila BR HAGA GE AOE ho > EAA I EAA ER MRE LE REMY » EAR HAMAS PHA BAO PTL SRSA PEM R © SBA CRRA I AR Be AL PAR RE A 9 BR HE A RS A PRLHR I Db ABR LAA MSA RG TEES HB) HS EAE RF 3 TAR kT ARRAS RG GE He GA A A Pit AA FAA GHLERLEER GH DH EF REARH RAMA MAST SEG SEE A HB DH SA A GE A) ore AB AR AR EE KEP RHATHBEMNR ARAM RL HFSRASLG: MRA CBR APH — HAF HH * RAR D E BS = GSE A AE BA 28M BS RRR RE AOR ARRE, AR MRE PR RB FLEE AVIRA RA, + TAKA RE + A eB RARE HS EE EO FE + HOT WATRAARLAA PEO MMAR RIRER - ERB aif => ABM SUiRR AT RHRR-BRA ROMFRRAARAR-ROAN: RR-HE AMS TAF AAR OAR HE A RH — OAR OD A HAR AARFEM + YAR AS AR SCRAP A > Ads SR HR + TUR Fh Sho TER HW 1983 3 A LL AAEM > AA SRP 100 ALARA EAH > th GBA RA MwA 2001 $F 12 24 A SHAE TH = Gk GA RAH HEP LH WAAC AE AE Hy 2k PAD HEP PARE Ae RR OG BR A HE AN th A EM MRE RG ROS RP SU: HR HH 44 Rw Stoll (1969)HF HEH > 24K Ackert and Tian (1998, 2001) » Bharadwaj and Wiggins (2001) » Capelle-Blaneard and Chaudhury (2001) $ #48 Sta BOTS» LTTE A ado F Ackert and Tian (1998)## th #642 4£ Toronto Index Participation Units (TIPs)s HMR PREGA EAMGARRTAAD » RHA M Ao MIE HH OE Tht LOE ARAL TR RRS > REAR HR RE ° HRA RA HF OS SHRM PSRAALH AM BTIPs ORG RAMSAR WM EHR WH HA HR > AB + Ackert and Tian (2001) AR MAR ROR AE > HRA ES HRPM SR AA) > EAP ho BRAS ER RRR StS} S&P S00 4 MSAK A W352 Arak BHA HAR + EMR Standard and Poor's Depository Receipts (SPDRs)i# =k EF 4% 5) AM Ay AT MI = RAB = PEA OR AR HAGEL RARLH RAT PRTMRUMM REA RM OARS BIR ESRB LG RARL I MH + SE RATA RA A AER RE HPD EEK + ORAM SHU RG OBA IR CME» Capelle-Blaneard and Chaudhury (2001) #45 9249 2 Bl ALAR 4a Mk(CACAO)E AE HT HR ATONE, ARTEL MRR I EF OE EM RS I WENEMARG - SRA AFTRHRARR EMMA BARGE BD + Aik BARE WILLA RTL » MERON A» SA BSA ho > Ao REA fo ABR SPA I EH OME + Ronn and Ronn (1989) 3€ i AHA A Heh Mie ETT 3 ALS LR Sho SPE E48 XH P(CBOE) HA RRA AN AAT AE» HL HIB RRL, LRAP HP RE ORBAA REMORSE 4&2 + Hemller and Miller (1997) 4K S&P 500 hak ALARA + AU SHAR ee RM 1987 SETS HE AT AR Ta SE RBA + Ak ATOR AMEE E+ MEA RAT A AUR SHH MR AUTEM MIET «RAM CHIRON S ATES» Bharadwaj and Wiggins (2001) Fi Sik (8 2 A 5 4- #8 PA Hil Ades S&P S00 ACME RCN AE (LEAPS) PHL GAA RIL» HES ROR AIRE ie RD EER DRO RAL a Ae ER BE PI He He LR + SA He Aa HAR Hy 1 M1 80% © AE BLAS Aa FR 7 da > TREE AR A TI ak BLO HR RE + AAR Bb SOUR ADR AL + FR A SAK» SR ARR (QO03) 04 RAR Hh SAE AAS A