Jumping Risk in Taiwan and Taiex Option Return in Taiwan

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.