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2010
- ISSN: 2010-023X (Print)
- Abbreviated Title: Int. J. Trade, Economics and Financ.
- Frequency: Quaterly
- DOI: 10.18178/IJTEF
- Editor-in-Chief: Prof.Tung-Zong (Donald) Chang
- Managing Editor: Ms. Shira. W. Lu
- Abstracting/ Indexing: Crossref, Electronic Journals Library , EBSCO
- E-mail: ijtef.editorial.office@gmail.com
IJTEF 2014 Vol.5(1): 118-121 ISSN: 2010-023X
DOI: 10.7763/IJTEF.2014.V5.352
DOI: 10.7763/IJTEF.2014.V5.352
Are Currency Exchange Rates Influenced by the Daily Option Expiry Levels?
A. Teder, P. Sander, and T. Mitt
Abstract—Option expiries and their influence on asset prices
has been studied across several stock markets and derivatives
markets. Current paper focuses on option expiries in the
currency market which has not been studied so widely. The aim
of the paper is to test whether daily currency exchange rates are
influenced by option expiries, more specifically whether the
exchange rate of a currency has a tendency to close near the
weighted average of various currency option levels. For that
purpose we calculate the weighted average price level of known
option expiry levels and test a) whether the price moves towards
the average expiry level during European trading day and b)
whether the price is closer to the average expiry level at the time
of expiration. We perform our tests on the most liquid currency
pairs EUR/USD and USD/JPY. We conclude that there is no
significant evidence that in average currency exchange rates are
influenced by the daily option expiry levels.
Index Terms—Currency market, exchange rate manipulation, option expiries, price behavior.
Allan Teder is with University of Tartu, Estonia (e-mail: allant@ut.ee).
Index Terms—Currency market, exchange rate manipulation, option expiries, price behavior.
Allan Teder is with University of Tartu, Estonia (e-mail: allant@ut.ee).
Cite:A. Teder, P. Sander, and T. Mitt, "Are Currency Exchange Rates Influenced by the Daily Option Expiry Levels?," International Journal of Trade, Economics and Finance vol.5, no.1, pp. 118-121, 2014.