• ISSN: 2010-023X
    • Frequency: Bimonthly
    • DOI: 10.18178/IJTEF
    • Editor-in-Chief: Prof.Tung-Zong (Donald) Chang
    • Executive Editor: Ms. Cherry L. Chen
    • Abstracting/ Indexing: Engineering & Technology Digital Library, ProQuest, Crossref, Electronic Journals Library, DOAJ , EBSCO, and Ulrich's Periodicals Directory
    • E-mail: ijtef@ejournal.net
IJTEF 2014 Vol.5(1): 118-121 ISSN: 2010-023X
DOI: 10.7763/IJTEF.2014.V5.352

Are Currency Exchange Rates Influenced by the Daily Option Expiry Levels?

A. Teder, P. Sander, and T. Mitt
Abstract—Option expiries and their influence on asset prices has been studied across several stock markets and derivatives markets. Current paper focuses on option expiries in the currency market which has not been studied so widely. The aim of the paper is to test whether daily currency exchange rates are influenced by option expiries, more specifically whether the exchange rate of a currency has a tendency to close near the weighted average of various currency option levels. For that purpose we calculate the weighted average price level of known option expiry levels and test a) whether the price moves towards the average expiry level during European trading day and b) whether the price is closer to the average expiry level at the time of expiration. We perform our tests on the most liquid currency pairs EUR/USD and USD/JPY. We conclude that there is no significant evidence that in average currency exchange rates are influenced by the daily option expiry levels.

Index Terms—Currency market, exchange rate manipulation, option expiries, price behavior.

Allan Teder is with University of Tartu, Estonia (e-mail: allant@ut.ee).

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Cite:A. Teder, P. Sander, and T. Mitt, "Are Currency Exchange Rates Influenced by the Daily Option Expiry Levels?," International Journal of Trade, Economics and Finance vol.5, no.1, pp. 118-121, 2014.

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