Date of Award

2013

Degree Type

Report

Degree Name

Master of Science (MS)

Department

Economics and Finance

First Advisor

Tyler J. Brough

Abstract

This thesis presents indication of mispricing of options in the Chinese option market, focusing on the very first and the most representative option in the Chinese option market. I used the Black-Scholes model to calculate the option price and compare the result to its real performance. The mispricing of sample option is statistically significant. With further analysis, I found out that underlying asset price and its volatility are the possible factors that most likely lead to mispricing. Because of the consistent mispricing, I investigated the industrial regulations from the China Securities Regulatory Commission (CSRC) and found proof with examples that barriers to arbitrages do affect the consistent mispricing. The barriers prevent arbitrageurs to take full advantage of mispriced options and stocks.

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