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Put-call parity, transactions costs and PHLX currency options: intra-daily tests

Hoque, A., Manzur, M. and Poitras, G. (2010) Put-call parity, transactions costs and PHLX currency options: intra-daily tests. In: Proceedings of 59th Midwest Finance Association Annual Conference, 24 - 27 February, Las Vegas, USA

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Abstract

This paper tests the impact of transactions cost specification on deviations from lower boundary and put-call parity properties. Using PHLX traded foreign exchange options, prices for puts and calls are matched to the nearest five minutes. The results indicate how boundaries on the arbitrage profit function determined by alternative measures of transactions costs can impact the interpretation of deviations from distribution free properties of options such as put-call parity.

Publication Type: Conference Paper
URI: http://researchrepository.murdoch.edu.au/id/eprint/39625
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