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Expiration Day Effects: Empirical Evidence from Taiwan

ABSTRACT

This study examines the expiration day effects of TAIEX futures and options. Empirical evidences show that abnormal volatility exists on the day before expiration day. Abnormal volume and abnormal return volatility are found in the first fifteen-minute window on the settlement. Price reversal is identified in the period from the last trading hour of the expiration day through the first fifteen minutes of trading on the settlement day. The implied volatility smile on the expiration day is significantly different from that on comparison days. Moreover, the historical volatility is negatively related to the volatility smile. Overall, the expiration effects do exist in the Taiwan ...

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