Market Reform and Efficiency: The Case of KOSPI200 Options |
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Authors: | Heejin Yang Doowon Ryu |
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Institution: | 1. School of Finance, College of Business Administration, Soongsil University, Seoul, Korea;2. Korea University Business School, Seoul, Korea |
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Abstract: | The Korean government and exchange have identified a need to regulate excessive speculative trading and to protect domestic individual investors from foreign and professional traders. As such, they have proposed an options market reform that requires higher levels of margin accounts for options trading and that increases the basic options multipliers in the KOSPI200 options market. This study examines how this market reform affects the price disagreement and adjustment behaviors of the index options market. Our analyses indicate that the efficiency and information quality of out-of-the-money options trades have increased since the reform took effect. |
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Keywords: | KOSPI200 options market efficiency market reform price adjustment price disagreement |
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