Studying On Efficiency Of The SSE 50 ETF Options Market Based On Option Parity Condition And Box Spread Model

In the past 20 years, China’s capital market has achieved great success and has become the world’s second largest capital market, with the world’s largest investor groups. However, China’s risk management system is not perfect, the behavior of investors is irrational, and the market with high volatility, high risk, and also the capital market is difficult to effectively play the role of resource allocation. In addition, there are some congenital defects in China’s capital market, such as the investment structure is irrational, the listed Corporation’s ownership structure has some problem, financial products structure are also irrational, etc. These problems restrict the development of China’s capital market. In order to accelerate the capital market rational and healthly develop, transfering market risk, increasing market liquidity, and guiding investors rational investing, the regulators timely introduction of options products-SSE 50ETF options.As a mature and basic financial derivative product, options has the function of price discovery, transfering market risk, and activing capital market and so on. It is an important part of the multi-level capital market. Its introduction may solve the problems of China’s capital market:first, the option has the function of transfering market risk, helping to enhance investor’s confidence to the market, and helping to promote the risk management, etc. Second, the option has the price discovery function can improve the spot market pricing efficiency, reducing the market fluctuation. Third, as a basic financial derivative products, options can promote innovation and development of the industry.Our country has launched the option product, but the transactions of option are subject to many restrictions, and the market can not play its function. Therefore, if the option can solve the problems of China’s capital market facing is still a question. In order to understand the important of the options to the capital market, it needs to know the validity of the option market.This paper is based on the background of above to explore the effeciency of the 50ETF options market There are a lot of model were used to test the efficiency of option market, such as the B-S and the riskless arbitrage condition (including the right convex model, a model of spread, the option price limit conditions). In this study we use the option parity and on the box spread model to test the eficiency of option market. On the one hand, because the two model have the advantages of simple operation, without the need for joint hypothesis test; on the other hand, the two models make complement to each other in test the arbitrage of different market, so the results will be more accurate.Contracts’transaction data in June and July,2015 are used. Those data are one-minute high frequency data. Statistical results show that even though considering the cost of option and stock, there are still a large number of arbitrage opportunities in the market, but arbitrage profit size is very small. Arbitrage opportunity of option parity is large than the results of box spread model. Through further study found that the market arbitrage opportunities are mainly concentrated in the opening 30 minutes, and we also found that the arbitrage opportunities of at-the-money are more frequency than out-of-the-money and in-the-money.To sum up, the research results show that SSE 50 ETF option market is efficienless. By constructing option parity strategy, investors can achieve more frequency arbitrage opportunities than the box spread arbitrage strategy. In addition, different value of option also effect arbitrage opportunities.