Stock index futures arbitrage in the Japanese markets

Menachem Brenner; Marti G. Subrahmanyam; Jun Uno

doi:10.1016/0922-1425(89)90005-4

Stock index futures arbitrage in the Japanese markets

Menachem Brenner^*, Marti G. Subrahmanyam, Jun Uno

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

6 Citations (Scopus)

Abstract

This study examines the behavior of the prices of the first two futures contracts on Japanese stock price indices to be traded, the Nikkei Stock Average (NSA) contract on the Singapore International Monetary Exchange (SIMEX), and the Osaka Stock Futures 50 (OSF50) contract on the Osaka Securities Exchange (OSE). We find significant departures between the actual prices of the contracts and their 'fair' prices in the early months of trading from June 1987 to June 1988. The NSA contract was dominated by discounts of the actual prices in relation to the 'fair' price while the OSF50 contract was characterized by both premiums and discounts during this period. This suggests the viability of 'cross-spreading' strategies which were analyzed and found to be profitable during much of the period under study.

Original language	English
Pages (from-to)	303-330
Number of pages	28
Journal	Japan and The World Economy
Volume	1
Issue number	3
DOIs	https://doi.org/10.1016/0922-1425(89)90005-4
Publication status	Published - 1989 Jul
Externally published	Yes

Keywords

Japanese financial markets
Stock index futures
cost of carry
cross spreading
fair pricing
implied interest rate
index arbitrage
market inefficiency
mispricing
program trading
trading restrictions
transactions costs

ASJC Scopus subject areas

Finance
Economics and Econometrics
Political Science and International Relations

Access to Document

10.1016/0922-1425(89)90005-4

Cite this

@article{3d40852bbad04be39eb6e936358749e4,

title = "Stock index futures arbitrage in the Japanese markets",

abstract = "This study examines the behavior of the prices of the first two futures contracts on Japanese stock price indices to be traded, the Nikkei Stock Average (NSA) contract on the Singapore International Monetary Exchange (SIMEX), and the Osaka Stock Futures 50 (OSF50) contract on the Osaka Securities Exchange (OSE). We find significant departures between the actual prices of the contracts and their 'fair' prices in the early months of trading from June 1987 to June 1988. The NSA contract was dominated by discounts of the actual prices in relation to the 'fair' price while the OSF50 contract was characterized by both premiums and discounts during this period. This suggests the viability of 'cross-spreading' strategies which were analyzed and found to be profitable during much of the period under study.",

keywords = "Japanese financial markets, Stock index futures, cost of carry, cross spreading, fair pricing, implied interest rate, index arbitrage, market inefficiency, mispricing, program trading, trading restrictions, transactions costs",

author = "Menachem Brenner and Subrahmanyam, {Marti G.} and Jun Uno",

year = "1989",

month = jul,

doi = "10.1016/0922-1425(89)90005-4",

language = "English",

volume = "1",

pages = "303--330",

journal = "Japan and the World Economy",

issn = "0922-1425",

publisher = "Elsevier",

number = "3",

}

TY - JOUR

T1 - Stock index futures arbitrage in the Japanese markets

AU - Brenner, Menachem

AU - Subrahmanyam, Marti G.

AU - Uno, Jun

PY - 1989/7

Y1 - 1989/7

N2 - This study examines the behavior of the prices of the first two futures contracts on Japanese stock price indices to be traded, the Nikkei Stock Average (NSA) contract on the Singapore International Monetary Exchange (SIMEX), and the Osaka Stock Futures 50 (OSF50) contract on the Osaka Securities Exchange (OSE). We find significant departures between the actual prices of the contracts and their 'fair' prices in the early months of trading from June 1987 to June 1988. The NSA contract was dominated by discounts of the actual prices in relation to the 'fair' price while the OSF50 contract was characterized by both premiums and discounts during this period. This suggests the viability of 'cross-spreading' strategies which were analyzed and found to be profitable during much of the period under study.

AB - This study examines the behavior of the prices of the first two futures contracts on Japanese stock price indices to be traded, the Nikkei Stock Average (NSA) contract on the Singapore International Monetary Exchange (SIMEX), and the Osaka Stock Futures 50 (OSF50) contract on the Osaka Securities Exchange (OSE). We find significant departures between the actual prices of the contracts and their 'fair' prices in the early months of trading from June 1987 to June 1988. The NSA contract was dominated by discounts of the actual prices in relation to the 'fair' price while the OSF50 contract was characterized by both premiums and discounts during this period. This suggests the viability of 'cross-spreading' strategies which were analyzed and found to be profitable during much of the period under study.

KW - Japanese financial markets

KW - Stock index futures

KW - cost of carry

KW - cross spreading

KW - fair pricing

KW - implied interest rate

KW - index arbitrage

KW - market inefficiency

KW - mispricing

KW - program trading

KW - trading restrictions

KW - transactions costs

UR - http://www.scopus.com/inward/record.url?scp=8744300102&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=8744300102&partnerID=8YFLogxK

U2 - 10.1016/0922-1425(89)90005-4

DO - 10.1016/0922-1425(89)90005-4

M3 - Article

AN - SCOPUS:8744300102

SN - 0922-1425

VL - 1

SP - 303

EP - 330

JO - Japan and the World Economy

JF - Japan and the World Economy

IS - 3

ER -

Stock index futures arbitrage in the Japanese markets

Abstract

Keywords

ASJC Scopus subject areas

Access to Document

Other files and links

Fingerprint

Cite this