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Exercising of Options in the Australian Options Market

Exercising of Options in the Australian Options Market Conditions defining rational and irrational exercising of options are presented and explained. These conditions are tested empirically by studying actual exercises in the Australian Options Market. It is found that two weak conditions are confirmed but the evidence on two strong conditions is mixed. Although most exercising appears to be consistent with the strong conditions, a significant number of exercises appear to violate them. Factors explaining these violations are not examined in detail, but it is suggested that transaction costs may be important. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Australian Journal of Management SAGE

Exercising of Options in the Australian Options Market

Brown, R. L.; Rainbow, K. A.
Australian Journal of Management , Volume 6 (1): 22 – Jun 1, 1981
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Publisher
SAGE
Copyright
Copyright © by SAGE Publications
ISSN
0312-8962
eISSN
1327-2020
DOI
10.1177/031289628100600101
Publisher site
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Abstract

Conditions defining rational and irrational exercising of options are presented and explained. These conditions are tested empirically by studying actual exercises in the Australian Options Market. It is found that two weak conditions are confirmed but the evidence on two strong conditions is mixed. Although most exercising appears to be consistent with the strong conditions, a significant number of exercises appear to violate them. Factors explaining these violations are not examined in detail, but it is suggested that transaction costs may be important.

Journal

Australian Journal of Management – SAGE

Published: Jun 1, 1981

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