Stock Index Arbitrage in the Turkish Market

Authors

  •   Ronald T. Slivka Adjunct Professor, Department of Finance and Risk Engineering, New York University - Polytechnic School of Engineering, 6 Metrotech Center, Brooklyn, NY 11201
  •   Canel Biryol MSc Financial Engineering, Department of Finance and Risk Engineering, New York University - Polytechnic School of Engineering, 6 Metrotech Center, Brooklyn, NY 11201

DOI:

https://doi.org/10.17010/ijf/2015/v9i11/81101

Keywords:

Index Arbitrage

, Futures, Turkey, BIST 30

G10

, G13, G14, G15

Paper Submission Date

, September 12, 2015, Paper sent back for Revision, October 5, Paper Acceptance Date, October 12, 2015.

Abstract

For the first time in the Turkish stock market, the width of the zero arbitrage band for BIST 30 stock index arbitrage was measured and decomposed into distinct contributions arising from commissions, fees, bid/offer spreads, and stock loan costs. Intraday data was used to compute returns for forward and reverse BIST 30 arbitrage once per minute daily for 2014 and 2015 futures contracts. The absence of profitable trades and the unusual persistence of BIST 30 futures priced below the costless theoretical fair value were explained by their position within the zero arbitrage band. Measurement of arbitrage cost elements confirmed the need for regulatory policies to encourage development of domestic stock loan capabilities. The status of BIST 30 index arbitrage was compared with that occurring a decade ago, thereby contributing to the growing literature on the evolution of futures pricing efficiency in global markets after introduction of index futures.

Downloads

Download data is not yet available.

Downloads

Published

2015-11-01

How to Cite

Slivka, R. T., & Biryol, C. (2015). Stock Index Arbitrage in the Turkish Market. Indian Journal of Finance, 9(11), 7–18. https://doi.org/10.17010/ijf/2015/v9i11/81101

Issue

Volume 9, Issue 11, November 2015

Section

Articles
Crossref
Scopus
Google Scholar
Europe PMC

References

Avci, E., & Cinko, M. (2010). The hedge period length and the hedging effectiveness: An application on Turkdex-ISE 30 index futures contracts. Journal of Yasar University, 18 (5), 3081-3090.

Basdas, U. (2009, October). Lead-lag relationship between the spot index and futures price for the Turkish derivatives exhange. DOI : http://dx.doi.org/10.2139/ssrn.1493147

Brennan, M. J., & Schwartz, E. S. (1990). Arbitrage in stock index futures. The Journal of Business, 63 (1, Part 2), S7-S31.

Çağli, E. C., & Mandaci, P. E. (2013). The long-run relationship between the spot and futures markets under multiple regime-shifts: Evidence from Turkish derivatives exchange. Expert Systems With Applications, 40 (10), 4206-4212. doi:10.1016/j.eswa.2013.01.026

Canina, L., & Figlewski, S. (1994). Program trading and stock index arbitrage. NYU Faculty Digital Archive. Retrieved https://archive.nyu.edu/handle/2451/27224

Chung, Y. P. (1991). A transactions data test of stock index futures market efficiency and index arbitrage profitability. The Journal of Finance, 46 (5), 1791-1809. DOI: 10.1111/j.1540-6261.1991.tb04644.x

Gay, G. D., & Jung, D. Y. (1999). A further look at transaction costs, short sale restrictions and futures market efficiency: The case of Korean stock index futures. Journal of Futures Markets, 19 (2), 153-174. DOI: 10.1002/(SICI)1096-9934(199904)19:2<153::AID-FUT2>3.0.CO;2-S

Ilter, H. K., & Alguner, A. (2013). Lead lag relationship and price discovery in Turkish stock exchange and futures markets. African Journal of Business Management, 7 (41), 4254-4262. DOI: 10.5897/AJBM11.2098

Kalayci, S., & Zeynel, E. (2009). Hedging in futures markets: Hedge ratio and hedging effectiveness based on the use of Turkdex-ISE 30 index contracts. The Journal of Faculty and Economics and Administrative Sciences, 14 (3), 39-63.

Kusakci, A. O., & Kusakci, S. (2012). A comparison of futures prices on Turkdex with conventional pricing theory. 3rd International Symposium on Sustainable Development, May 31 - June 01 2012, Sarajevo. Retrieved from http://eprints.ibu.edu.ba/id/eprint/1301

Maniar Sr., H., Maniar, D., & Bhatt, R. (2006). Arbitrage opportunities in intraday trading between futures, options and cash markets : A case study on NSE India. DOI : http://dx.doi.org/10.2139/ssrn.962006

McMillan, D. G., & Ülkü, N. (2009). Persistent mispricing in a recently opened emerging index futures market: Arbitrageurs invited. Journal of Futures Markets, 29 (3), 218-243. DOI: 10.1002/fut.20355

Olgun, O., & Yetkiner, Y. H. (2009). The superiority of time-varying hedge ratios in Turkish futures market (Working Paper 0907). Retrieved https://ideas.repec.org/p/izm/wpaper/0907.html

Pathak, R., Ranajee, & Kumar, S. (2014). Price discovery in the equity derivatives market: A literature survey. Indian Journal of Finance, 8 (6), 47-57. DOI: 10.17010/ijf/2014/v8i6/71913

Slivka, R.T., Chang, C. H., & Yu, X. (2014). Fourier analysis of India's implied volatility index. Indian Journal of Finance, 8 (10), 7-19. DOI:10.17010//2014/v8i10/71845

Slivka, R. T., Wu, J., & Shah, V. (2012). Arbitrage of single stocks versus futures in India. Indian Journal of Finance, 6 (1), 11-18.

Slivka, R. T., Zhang, Y., & Zhang, W. (2010). Index arbitrage in China. Journal of Indexes Europe, 2 (1), 28-33.

Yadav, P. K., & Pope, P. F. (1994). Stock index futures mispricing: Profit opportunities or risk premia? Journal of Banking & Finance, 18 (5), 921-953. doi:10.1016/0378-4266(94)00026-3