An analysis of the arbitrage efficiency of the Chinese SSE 50ETF options market

摘要

This paper analyzes the arbitrage efficiency of the first Chinese 50ETF option contracts traded on the Shanghai Stock Exchange (SSE). Put-call parity arbitrage, box spread arbitrage, and boundary arbitrage strategies are used to test the efficiency of the Chinese SSE 50ETF options market during the sample period (February 2015 April 2017). Furthermore, various transaction costs - such as transaction fees, market-impact costs, bid-ask spreads, margins and capital opportunity costs - and different scenarios are included in the arbitrage tests. The empirical results reveal that arbitrage opportunities are existing but infrequent when transaction costs are considered. In terms of box spread arbitrage and boundary arbitrage strategies, the percentage of profitable arbitrage opportunities is low. In terms of the put-call parity arbitrage strategy, the results held most of the time, and profitable arbitrage opportunities appear at times of great fluctuation in the Chinese stock market from May to September 2015. Further analysis of arbitrage opportunities in terms of both option moneyness and maturity show that more arbitrage opportunities appear in options with comparatively poor liquidity and inactive trading. Overall, there is no strong evidence found against the Chinese SSE 50ETF options market, although arbitrage opportunities exist infrequently.