Review and prospects of Taiwan derivatives research: pricing, hedging, and arbitrage

Bing Huei Lin, San Lin Chung*, Shih Kuo Yeh

*Corresponding author for this work

Research output: Contribution to journalJournal Article peer-review

3 Scopus citations


This paper reviews the existing literature for pricing and hedging derivatives in Taiwan. We focus on articles published in TSSCI journals after the year 2000. The underlying assets studied in Taiwan include equity, foreign currency, commodities, interest rate, real estate, weather, etc. The financial derivatives priced in Taiwan include futures, forward contract, standard options, swaps, hybrid products (such as convertible bonds), exotic options (e.g., Asian options), etc. The pricing models adopted include Black-Scholes model, jump diffusion model, stochastic volatility model, GARCH model, Levy model, etc. The prcing methods used contain lattice method, Monte Carlo simulation method, the fast Fourier method, dynamic programming, etc. Concerning the hedging and arbitrage studies in Taiwan, many risk factors are considered, e.g., equity, foreign currency, commodities, interest rate, etc. The hedging strategies studied mainly focus on proposing new or improved econometric models/methods. Finally, the arbitrage research covers the Intra- and Intermarket arbitrage strategies, information transmission efficiency, etc.

Original languageEnglish
Pages (from-to)255-304
Number of pages50
JournalNTU Management Review
Issue number1
StatePublished - 01 12 2016
Externally publishedYes

Bibliographical note

Publisher Copyright:
© 2016, College of Management Press. All right reserved.


  • Arbitrage
  • Derivatives
  • Hedging
  • Pricing


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