AIRCC's International Journal of Computer Science and Information Technology

Open Access Open Access  Restricted Access Subscription Access

Jumping Risk in Taiwan and Taiex Option Return in Taiwan


Affiliations
1 Department of Business Administration, National Kaohsiung University of Applied Science, Kaohsiung, Taiwan, Province of China
2 Yango College, Fuzhou, 350015, China
3 Institute of Human Resource Management, National Sun Yat-Sen University, Taiwan, Province of China
 

With low-interest environment in recent years, investment of financial commodity was unable to meet the requirements of necessary paid by society. Therefore, the traditional financial tool were replacing with derivative financial commodity which were high risk, high lever, and high complex; including option, forward contract, futures, credit default swap, and collateralized debt obligations. Global Board Options Exchanges were founded in 1983 that S&PS00 (SPX) index option which launched by the Chicago Board Options Exchange (CBOE). Moreover CBOE was the option which target on trade index at the earliest, and CBOE was the most popular exchange with option trade. Taiwan Futures Exchange (TFE) launched Taiwan weighted index options (TXO) in December 2001 and, and launched stock options in 2003. Currently TXO was the most actively traded options market in Taiwan, but almost had no stock options trading volume due to the release of warrants market. However warrants market and individual stock options had higher homogeneous and better mobility to influence the stock options market. Although Taiwan options market started lately, develops quite fast, the option of Taiwan index was the sixth volume in the global select token name in 2013, that showed that Taiwan index options was a good target on the options-related research. Due to the globalization of financial markets, the single original market waved turn into the global storm which that affected financial asset prices were no longer continuous fluctuations, and it showed a leaps of change by the Butterfly Effect. Because the price process included continuity and discontinuity, the spread and jump process was more accurate than Brownian motion (BM). Currently the derivatives study biased on interest rate futures, foreign futures or foreign exchange futures options and Taiwan index futures options. By the way, the study about the jumping risks related to Taiwan index options effects is rare.

Keywords

Jumping Risk, TAIEX Option Return, TXO, TFE, CBOE.
User
Notifications
Font Size

  • J. D. Hamilton, A new approach to the economic analysis of nonstationary time series and the business cycle , Econometrica, vol. 57, pp.357–384. 1989

  • G., C. Bakshi, Cao, and Z. Chen, “Do call prices and the underlying stock always move in the same direction?”, Review of Financial Studies, vol. 13, pp.549–584. , 2000

  • E.,Fama, and J. MacBeth, “Risk, return, and equilibrium: Empirical tests”, Journal of Political Economy, vol. 71, pp.607–636. , 1973

  • E. F . Fama,;K. R. French, Common risk factors in the returns on stocks and bonds".Journal of Financial Economics.33, 1993.

  • Fama, E. F.;French, K. R.. The Cross-Section of Expected Stock Returns. The Journal of Finance.7(2): 427, 1992.

  • Jagannathan, Ravi, and Zhenyu Wang, The Conditional CAPM and the Cross-Section of Expected Returns, Journal of Finance, vol. 51, pp.3-54, 1996

  • Dimson, E., Risk measurement when shares are subject to infrequent trading, Journal of Financial Economics, vol. 7, pp.197-226, 1979

  • B. Y., Chang, P., Christoffersen, and K. Jacobs, Market Skewness and the Cross-Section of Stock Returns,Working Paper, McGill University., 2009

  • G., Bakshi, and N. Kapadia. Delta-Hedged Gains and the Negative Volatility Risk Premium. Review of Financial Studies, 16 (2) p 527-566, 2003

  • Coval, J., and T. Shumway, ,”Expected option returns”, Journal of Finance, vol. 56, pp.983–1009.

  • Bakshi, G. and N. Kapadia, Delta-Hedged Gains and the Negative Market Volatility Risk Premium, The Review of Financial Studies, vol. 16 (2), pp.527-566, 2003.

  • W. Newey, and K. West, A simple positive, semidefinite, heteroskedasticity and autocorrelation consistent covariance matrix, Econometrica, vol. 29, pp.229-256, 1987.

  • Lopez-de-Silanes, Florencio, Andrei Shleifer, and R. W. Vishny, Privatization in the United States, Rand Journal of Economics 28, 1997.


Abstract Views: 215

PDF Views: 125




  • Jumping Risk in Taiwan and Taiex Option Return in Taiwan

Abstract Views: 215  |  PDF Views: 125

Authors

Wen-I Hsiao
Department of Business Administration, National Kaohsiung University of Applied Science, Kaohsiung, Taiwan, Province of China
Jung-Fan Chen
Department of Business Administration, National Kaohsiung University of Applied Science, Kaohsiung, Taiwan, Province of China
Jui-Chan Huang
Yango College, Fuzhou, 350015, China
Tzu-Jung Wu
Institute of Human Resource Management, National Sun Yat-Sen University, Taiwan, Province of China

Abstract


With low-interest environment in recent years, investment of financial commodity was unable to meet the requirements of necessary paid by society. Therefore, the traditional financial tool were replacing with derivative financial commodity which were high risk, high lever, and high complex; including option, forward contract, futures, credit default swap, and collateralized debt obligations. Global Board Options Exchanges were founded in 1983 that S&PS00 (SPX) index option which launched by the Chicago Board Options Exchange (CBOE). Moreover CBOE was the option which target on trade index at the earliest, and CBOE was the most popular exchange with option trade. Taiwan Futures Exchange (TFE) launched Taiwan weighted index options (TXO) in December 2001 and, and launched stock options in 2003. Currently TXO was the most actively traded options market in Taiwan, but almost had no stock options trading volume due to the release of warrants market. However warrants market and individual stock options had higher homogeneous and better mobility to influence the stock options market. Although Taiwan options market started lately, develops quite fast, the option of Taiwan index was the sixth volume in the global select token name in 2013, that showed that Taiwan index options was a good target on the options-related research. Due to the globalization of financial markets, the single original market waved turn into the global storm which that affected financial asset prices were no longer continuous fluctuations, and it showed a leaps of change by the Butterfly Effect. Because the price process included continuity and discontinuity, the spread and jump process was more accurate than Brownian motion (BM). Currently the derivatives study biased on interest rate futures, foreign futures or foreign exchange futures options and Taiwan index futures options. By the way, the study about the jumping risks related to Taiwan index options effects is rare.

Keywords


Jumping Risk, TAIEX Option Return, TXO, TFE, CBOE.

References