An Inquiry Into The Effects Among Options, Futures And Underlying Markets In An Efficiency View

Financial Derivative Instruments is derivative from Underlying Asset such as bond, stock and so on. Their benefits depend on the price change of underlying assets. In generally, the underlying financial instruments and commodities may be considered as the writing assets. Even the index of enterprise bankrupt and the amount of falling snow also can be use as writing assets of derivative. So the kinds of derivatives are various. But from the aspect of the actual statues of financial markets and developing trend, the derivatives writing on underlying financial asset is dominant. Furthermore financial options and futures writing on financial asset are overwhelmed. Therefore the financial options and futures are core of the financial derivatives. The relationships among the financial options, futures and underlying assets are the hot issues in academic circles. Contrary theories and empirical conclusions have exist for a long time, which is the key question for developing countries to set up financial options and futures markets, so is china as the biggest developing country. Due to the setup of the market economy and joining the WTO, accelerating the development of financial options and futures markets has been placed on government's agenda. What are effects of the financial options and futures markets on fundamental financial markets is inevitable question. The theoretical ambition of this paper is to give fairly more systematic and scholarly attention to the question. The paper mainly conducts discussions about the following problems though an efficiency view.Firstly, take a theoretical analysis of necessity of financial options. On one hand, in order to discover the effects of underlying financial assets on options, the paper utilizes the options pricing theory to prove that underlying financial assets determine the options' price, which demonstrates that the options' earning and risk rest on underlying financial assets. On the other hand, in order to discover the effects of options on underlying financial assets, the paper introduces the Detemple and Selden model to prove that options affect the price of underlying financial assets. So the relationships between financial options and underlying assets become clear. Furthermore, the paper discusses the reasons of above theoretical analysis controversy through empirical study.Secondly, take a theoretical analysis on relationships between financial options and financial market efficiency. The paper discusses the different views on financial efficiency. Arrow introduced the state-space approach to uncertainty in economics has brought the recognition that an inadequate number of markets in contingent claims would be a source of inefficiency. Fama introduced the efficient market hypothesis that reveals the information reaction abilities of financial markets. The paper successfully unites them into the financial market efficiency on collocating financial resources and risk. The efforts discover the effect mechanism of options on financial market efficiency. Thirdly, research the relationships among futures, options and underlying financial assets. The paper discovers the direct effects of futures on financial markets are futures depress the financial market segmentation though enhancing the relevancy of each financial market. The indirect that are through replicating options, so the replicating options affect the financial market efficiency. Thus, the efficient effects among options, futures and other financial markets become clear. Fourthly, condition analysis on above efficiency mechanism. Although options and futures affect the financial efficiency, the condition shouldn't be ignored. The paper conducts an analysis of the effects in developed country as well as developing country, in opening economy as well as closed one, in big country as well as small one. We conclude that the developing statues of financial options and futures markets should be consistent with the economic and financial market statues, otherwise the authorities have to re...