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Efficient Selection of Insured Currency Positions: Protective Puts vs. Fiduciary Calls

Published online by Cambridge University Press:  06 April 2009

James A. Conover  and
David A. Dubofsky
James A. Conover
Affiliation:
FIREL Department, College of Business Administration, University of North Texas, Denton, TX 76203
David A. Dubofsky
Affiliation:
Department of Finance, Texas A&M University, College Station, TX 77843
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Abstract

We examine the empirical results from implementation of portfolio insurance strategies employing currency spot and futures options. Hypotheses are generated from Ogden and Tucker's (1988) generalizations concerning the relative values of American spot currency options and currency futures options. We find that protective puts using futures options are generally dominated by both protective puts that use options on spot currencies and by fiduciary calls on futures contracts. This suggests that the prices of puts on foreign currency futures contracts are too high, relative to foreign currency futures calls and to puts on spot currencies.

Information

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 30 , Issue 2 , June 1995 , pp. 295 - 312
Copyright
Copyright © School of Business Administration, University of Washington 1995

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