Stock index futures arbitrage in the Japanese markets

Menachem Brenner, Marti G. Subrahmanyam, Jun Uno

Research output: Contribution to journalArticle

10 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 languageEnglish
Pages (from-to)303-330
Number of pages28
JournalJapan and the World Economy
Volume1
Issue number3
DOIs
Publication statusPublished - 1989
Externally publishedYes

Fingerprint

market
price index
premium
Singapore
Arbitrage
Stock index futures
Futures contracts
Discount
Fair price
Stock prices
Viability
Price index
Premium

Keywords

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

ASJC Scopus subject areas

  • Economics and Econometrics
  • Finance

Cite this

Stock index futures arbitrage in the Japanese markets. / Brenner, Menachem; Subrahmanyam, Marti G.; Uno, Jun.

In: Japan and the World Economy, Vol. 1, No. 3, 1989, p. 303-330.

Research output: Contribution to journalArticle

Brenner, Menachem ; Subrahmanyam, Marti G. ; Uno, Jun. / Stock index futures arbitrage in the Japanese markets. In: Japan and the World Economy. 1989 ; Vol. 1, No. 3. pp. 303-330.
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