Analysis on the KOSPI200 option from the time-series and cross- sectional perspectives

[摘要] The Korean derivatives market is one of the most active markets in the world. The KOSPI200 options accounted for 43.4% of the global trading volume in equity index futures and options in 2011. It also accounted for 93.5% of the total trading volume in the Korean derivatives market in 2011. In this thesis, I examine why investors have traded KOSPI200 options so much among various equity index options in many global exchanges, and which factors have caused the change of the trading volume of the KOSPI200 options. From the cross-sectional perspective, I find that no-tax, low transaction fee and low margin requirement are the crucial factors explaining the high trading volume of the KOSPI200 options. High volatility of underlying index and high proportion of individual investors are also contributing factors that have differentiated the Korean derivatives market from other competing exchanges. From the time-series perspective, I conclude that contract size and margin requirement have clear causal effect on the trading volume of KOSPI200 options, while the proportion of individual investors has less clear effect on volume. In fact, the trading volume of KOSPI200 options shows an increasing pattern as these three factors decrease, and a decreasing pattern as three factors increase.

[发布机构] Massachusetts Institute of Technology