@article {Lin:2011:0003-6846:3103,
title = "The limitation of monotonicity property of option prices: an empirical evidence",
journal = "Applied Economics",
parent_itemid = "infobike://routledg/raef",
publishercode ="routledg",
year = "2011",
volume = "43",
number = "23",
publication date ="2011-09-01T00:00:00",
pages = "3103-3113",
itemtype = "ARTICLE",
issn = "0003-6846",
eissn = "1466-4283",
url = "https://www.ingentaconnect.com/content/routledg/raef/2011/00000043/00000023/art00008",
doi = "doi:10.1080/00036840903427265",
author = "Lin, Chuang Yuang and Chen, Dar Hsin and Tsai, Chin Yu",
abstract = "Many option pricing models are based on the assumption that the underlying asset price follows one-dimensional diffusion process. An alternative approach is to test the properties that should hold for all models based on a given stochastic process for the underlying asset. Following
P{\’e}rignon (2006), we test the empirical validity of the monotonicity property for option prices by collecting all transaction data from 1 July 2006 to 31 December 2006 for option contracts traded on the Taiwan Futures Exchange (TAIFEX). We find that sampled intraday option prices violate
the monotonicity property between 29.97% and 57% of the time, and that call and put prices often increase, or decrease, together. We also find evidence to show that the frequent violations of the monotonicity property are to a large extent attributable to microstructure effects and that they
arise from rational trading tactics.",
}