Arbitrage Profitability of the KOSPI200 Futures Spread

This study explores the arbitrage profitability of the KOSPI200 futures spread, using intraday data during 10 days prior to the expiration day of each contract for the 9/3/2001 ∼ 6/912005 period. The theoretical frameworks for arbitrage strategies were developed for the analysis. Our results show that 97.36% of the total 8.633 observations were fairly priced. 1.46% (126 observations) were underpriced, and 1.18% (102 observations) were overpriced, in the ex post arbitrage profitability analysis between the futures spread and the calendar spread. Also, in the arbitrage profitability analysis based on the mispricing of the KOSPI200 futures spread against the theoretical price. 90.39% of the total 10.054 observations were fairly priced and 9.61 % (966 observations) were underpriced. There was no overpriced observation. The ajority of those underpriced observations were concentrated in the 3rd Quarter of 2001 and the 1st quarter of 2003. Overall, there were very few arbitrage opportunities except for the introductory period and some contracts with high uncertainty, implying that the KOSPI200 futures spread market has been generally efficient.