Title: Arbitrage illustrated by options models

Authors: Tumellano Sebehela

Addresses: Henley Business School, University of Reading, Whiteknights, Reading RG6 6UD, UK

Abstract: Most empirical studies on arbitrage opportunities tend to focus on arbitrage resulting from two 'securities', normally option value in relation to its underlying assets. However, in this empirical study it is illustrated that by writing 'different' option values the 'amount' of arbitrage increase than in case alluded earlier on in this abstract. More importantly, there are emerging multiple flexibilities in each case which gives rise to hedging opportunities without incurring any extra cost if any. Lastly, despite that the empirical study on multiple arbitrage opportunities, overall results exemplify that sequential exchange opportunities are beneficial as they afford one opportunity to earn riskless profits while hedging without incurring extra costs.

Keywords: multiple options strategies; options models; real estate investment trusts; REITs; kurtosis; skewness; arbitrage opportunities; hedging opportunities; sequential exchange.

DOI: 10.1504/IJFMD.2012.053317

International Journal of Financial Markets and Derivatives, 2012 Vol.3 No.1, pp.1 - 11

Received: 12 Jan 2012
Accepted: 01 Apr 2012
Published online: 30 Aug 2014 *

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