Empirical tests of option-pricing-model adequacy and options-market efficiency
characteristically attempt to identify riskless opportunities for excess trading profits by analyzing trading strategies of either absolute-valuation or relative-valuation. This paper develops and tests of arbitrage trading strategy which is a combination of two option spread known as a box spread. This strategy involves the simultaneous use of four European options with same maturity and be able to create a position that if the systhetic lending rate from buying the box spread exceeds the risk-free borrowing rate, there is an arbitrage opportunity. Alternatively, if the risk-free lending rate exceeds the synthetic borrowing rate from selling box spread, there is an arbitrage opportunity. This paper examines the market efficiency of KOSPI 200 index options market before and after the Crash during the period of 1997 and 2000. Though the total profit is lessened, apparent arbitrage opportunities are widely observed and this strategy is valid even with 1 minute execution delay.