Foreign equity options (Mexico).

详细信息   

• 作者：Chu ; Ting-Heng.
• 学历：Doctor
• 年：2000
• 导师：Swidler, Steve
• 毕业院校：The University of Texas
• 专业：Economics, Finance.
• ISBN：0599879998
• CBH：9981520
• Country：USA
• 语种：English
• FileSize：5918731
• Pages：174

文摘

The last decade has witnessed a drastic change in the global economy, and with it, a fast growth of U.S. listed derivatives with foreign securities as the underlying assets. Foreign equity options provide an important tool for domestic investors seeking international diversification and management of both stock price risk and exchange rate risk. Unlike standard stock options, foreign equity options reveal the market's anticipation about future volatilities of the underlying equity, the exchange rate, or a combination of the two. Moreover, they create new hedging and speculative opportunities for foreign markets investors.;Given the recent currency crisis in Mexico, Southeast Asia, and Brazil, work on exchange rate expectations in emerging markets has gained increasing attentions. For most emerging countries, derivatives on their currencies are unlikely to trade on an U.S. exchange and thus limit the opportunity to study market expectations about exchange rates for these countries. Alternatively, foreign equity options traded on domestic exchange provide valuable information concerning market expectations of a currency's future expected value.;The first part of this dissertation examines the implied risk neutral density (RND) function from options on the American Depository Receipts (ADRs) of Telefonos de Mexico (Telmex) to test whether U.S. capital markets anticipated the 1994 peso devaluation. The Telmex option data is obtained from the Market Data Report (MDR) of the Chicago Board Options Exchange from December 1, 1994 to January 31, 1995. If the Mexican Government peso policy change has little effect on the firm's equity, then shifts in the Telmex RND function was caused primarily by changes in market expectations about the greater uncertainty of the peso exchange rate. This study examines the distribution properties of implied RND function of Telmex ADR around the time of the peso devaluation and finds persuasive evidence that market anticipated the change in the Mexican government's foreign exchange policy.;The second part of the thesis proposes several trading strategies for the domestic investor who wants to hedge a foreign stock or foreign currency position with an ADR option position. The analysis also considers several possible arbitrage opportunities between the different option markets. The data consists of one Brazilian company, one Australian company, and one Netherlands company. The ADRs of these three companies are actively traded on the New York Stock Exchange. The bid, ask, and last trading prices of ADR options, stock options, and foreign currency options are downloaded daily between 10: 00 and 12:00 P.M. central time from several websites of related domestic and foreign exchanges. The data covers from December 1, 1998 to February 29, 2000. Additionally, the analysis considers how sensitive the performance of selected options trading strategies is to different replicating periods as well as to different portfolio rebalancing periods.