We investigate regime-dependent mispricing adjustments and price dynamics of the spot index and index derivatives using intraday data of KOSPI 200 futures and options, which have occupied the global top-tier position in recent years based on trading volume. We classify regimes based on mispricing, which is defined as the size of the deviations between theoretical prices and transaction prices. The estimated effective transaction costs of arbitrage strategies are asymmetric. Mispricing is significantly corrected only when the arbitrage strategy is sufficiently profitable. Investors respond to overpricing more sensitively than underpricing in the derivatives market. The stock market and derivatives markets lead each other, but the stock market only weakly leads the derivatives markets. There is an abnormal response to mispricing in the options market that is possibly explained by the dominance of domestic individual investors and hedging demand. The price of derivatives reacts to shocks in the stock market differently according to the regime, but the responses in the market index to shocks in the derivatives market do not vary much with the regimes. This implies that mispricing might be exploited by the trading of derivatives rather than the trading of stocks.
Keywords KOSPI 200 futures and options; Mispricing; Threshold vector error correction model (TVECM); Transaction costs
학회 소식
공지사항