281 / 414
臺大管理論叢
第
27
卷第
1
期
281
Review and Prospects of Taiwan Derivatives Research: Pricing,
Hedging, and Arbitrage
1. Introduction
Ever since the introduction of covered call warrants in the Taiwan Stock Exchange
(TWSE) in 1997, the derivatives market in Taiwan has grown quite rapidly. For example, the
number of warrants issued and listed in TWSE increased from 12 in 1998 to 15,527 in 2011.
In response to this financial market development, derivatives research in Taiwan has also
progressed very well. Many academic journal articles related to the derivatives market have
been published after 1993.
15
To summarize the contributions of prior studies, this paper
reviews the existing literature on the pricing and hedging of derivatives in Taiwan. We focus
on articles published in 16 TSSCI journals after the year 2000.
We first review the achievements of Taiwanese scholars’ studies of derivatives pricing.
Our analyses are classified in terms of (1) the underlying assets studied, (2) the types of
financial derivatives, (3) the pricing models adopted, and (4) the pricing methods employed.
We then review studies in Taiwan on hedging and arbitrage. The literature concerning
hedging studies is divided into two categories: futures and options. In addition, arbitrage
studies cover topics such as Intra-market and Inter-market arbitrage strategies and
information transmission efficiency. Finally, in the last section we conclude our paper and
provide suggestions and directions for future research.
2. Review of the Derivatives Pricing Literature in Taiwan
There are many derivatives pricing articles published in TSSCI journals since 2000. The
contributions of these papers are analyzed in four directions. First, we list studies in Taiwan
on the underlying assets and their corresponding derivatives as follows:
Equity derivatives: the Seller-initiated American option pricing model and optimal
exercise boundary of American options.
Bing-Huei Lin
, Professor, Department of Finance, National Chung Hsing University
San-Lin Chung
, Professor, Department of Finance, National Taiwan University
Shih-Kuo Yeh
, Professor, Department of Finance, National Chung Hsing University
15 As suggested by an anonymous referee, Chen and Lee (1993) present probably the first academic paper
related to option pricing in Taiwan.