The test of efficiency of ISE 100 index futures contracts

Arbitrage opportunities between TURKDEX-ISE 100 index derivative contracts and its underlying index of ISE 100 Turkey's first and only Derivative Exchange Market, Izmir Derivative Exchange, has been investigated. The data between 4th February 2005-21th May 2012 has been tested by the cost carry model. Total arbitrage profits, arbitrage profit standard deviations, the average arbitrage profit, how the arbitrage opportunity changes with respect to number of days to maturity and the number and frequency of short and long arbitrage opportunities have been analyzed. The number and frequency of short and long arbitrage opportunities were found to fluctuate continuously in annual basis. Eventhough the difference between spot and derivative price has been expected to decrease as the maturity approaches, it is observed that it has increased in some years. The average arbitrage profit, arbitrage standard deviation and total arbitrage profit vary on an annual basis. In summary, the prices occuring in TURKDEX give opportunity for arbitrage since these contracts are not efficiently priced.