Date of Award

1984

Document Type

Dissertation

Degree Name

Doctor of Philosophy (PhD)

Abstract

This dissertation examines the weak-form market efficiency of the option on Treasury Bond futures contract at the Chicago Board of Trade (CBOT) from its inception in October, 1982, through mid-June, 1983. Arbitrage techniques which have been used in studies of stock option market efficiency including lower boundary conditions on calls and puts, put-call parity, and the box spread, were used in this study to evaluate the efficiency of the option on Treasury Bond futures market. Transaction-by-transaction data were used over the period of study to simulate ex post and ex ante arbitrage opportunities from the vantage point of the floor trader in the Treasury Bond options pit at the CBOT. In the ex post tests, exploitable arbitrage opportunities were identified after satisfying profitability and simultaneity constraints. In the ex ante tests, acceptable ex post opportunities were executed after some lag time ranging from instantaneous execution to the next price change for all legs of an arbitrage trading strategy. Both the number and size of ex ante violations were examined for evidence against weak-form market efficiency.

Pages

174

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