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BUSINESS AND ECONOMICS RESEARCH JOURNAL

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Article Information
Journal: Business and Economics Research Journal
Title of Article: An Empirical Test of Efficiency of Exchange-Traded Currency Options in India
Author(s): Aparna Bhat, Kirti Arekar
Volume: 6
Number: 4
Year: 2015
Page: 1-17
ISSN: 1309-2448
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
JEL Classification: G13, G14

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