This thesis studies the efficiency of stock index futures and option market after option market was opened on July 7, 1997 in Korea. Because no-arbitrage opportunity means market efficiency I research the market efficiency by testing arbitrage opportunity. I calculate no-arbitrage bands in three methods which are the tradings of stock and futures, stock and option, and option and futures. And I test which futures and option market prices move in the no-arbitrage bands or not.
This thesis analyzes the daily closed price data from July 1997 to September 1998 in order to test entirely the market trends of futures and option after option market was setted up and in addition, the intraday minute price data from August to September 1998 in order to test concentrately the recent trends.
The result is that futures market prices have been generally undervalued, put option prices have been generally in the no-arbitrage bands, on the other hand, call option prices are recently undervalued and in the put-call futures parity, market prices have breaked away from no-arbitrage bands. This result implies that stock index futures and option markets don't have the market efficiency.
