Research output: Contribution to Journal/Magazine › Journal article › peer-review
Research output: Contribution to Journal/Magazine › Journal article › peer-review
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TY - JOUR
T1 - Hedging efficiency in the Greek options market before and after the financial crisis of 2008
AU - Shackleton, Mark
AU - Voukelatos, Nikolaos
N1 - Part of Nikos Voukelatos PhD work at Lancaster
PY - 2013/4
Y1 - 2013/4
N2 - This study examines the hedging effectiveness of the emerging Greek options market before and after the financial crisis of 2008. We test the hypothesis of market efficiency by analyzing violations of FTSE/ASE-20 index option returns with respect to standard option theory, estimating option risk-premia, and testing the statistical significance of the returns to delta and delta–vega neutral straddles. Our empirical results suggest that, despite a certain level of mispricing, the Athens Derivatives Exchange maintained a relative level of efficiency before 2008. However, the economic crisis has had a significant impact on the Greek options market, as evidenced by more pronounced violations of theoretical predictions observed in option returns and risk-premia. These findings have direct implications for the risk management of international portfolios, since the feasibility and effectiveness of hedging exposure in Greek investments is found to have declined precisely when it is needed the most.
AB - This study examines the hedging effectiveness of the emerging Greek options market before and after the financial crisis of 2008. We test the hypothesis of market efficiency by analyzing violations of FTSE/ASE-20 index option returns with respect to standard option theory, estimating option risk-premia, and testing the statistical significance of the returns to delta and delta–vega neutral straddles. Our empirical results suggest that, despite a certain level of mispricing, the Athens Derivatives Exchange maintained a relative level of efficiency before 2008. However, the economic crisis has had a significant impact on the Greek options market, as evidenced by more pronounced violations of theoretical predictions observed in option returns and risk-premia. These findings have direct implications for the risk management of international portfolios, since the feasibility and effectiveness of hedging exposure in Greek investments is found to have declined precisely when it is needed the most.
KW - Market efficiency
KW - Emerging markets
KW - Options
KW - Risk management
U2 - 10.1016/j.mulfin.2012.10.005
DO - 10.1016/j.mulfin.2012.10.005
M3 - Journal article
VL - 23
SP - 1
EP - 18
JO - Journal of Multinational Financial Management
JF - Journal of Multinational Financial Management
SN - 1042-444X
IS - 1-2
ER -