A trading strategy based on Callable Bull/Bear Contracts

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalNot applicablepeer-review

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Author(s)

Detail(s)

Original languageEnglish
Pages (from-to)186-198
Journal / PublicationPacific Basin Finance Journal
Volume18
Issue number2
StatePublished - Apr 2010

Abstract

The Callable Bull/Bear Contract is a barrier options contract recently introduced to the Hong Kong market. In this study, we propose a trading strategy that defines the entry point and exit point using information on the contract's call price and mandatory call event. Using data on contracts based on the Hong Kong Hang Seng Index, it is shown that the proposed trading strategy, on average, yields some decent trading returns that vary quite substantially across individual trades. Exploratory analyses indicate that trading returns are associated with volatility observed during a contract's lifespan and, to a lesser extent, with volatility in the pre-issuance period. Further, an issuer's relative issuing frequency may bear some implications for the trading strategy's performance. © 2009 Elsevier B.V. All rights reserved.

Research Area(s)

  • Barrier options, Daily highs and lows, Trading returns, VECM

Citation Format(s)

A trading strategy based on Callable Bull/Bear Contracts. / Cheung, Yan-Leung; Cheung, Yin-Wong; He, Angela W.W.; Wan, Alan T.K.

In: Pacific Basin Finance Journal, Vol. 18, No. 2, 04.2010, p. 186-198.

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalNot applicablepeer-review