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This paper computes the out-the-sample trading results using option pricingmodels and direct forecasting models. The underlying assets are S&P 500 stock index trading on the CME in U.S. The out-the-sample period is from January 1992to June 1996. And the trading horizon is one month. The empirical results show when transaction costs are not considered, using option pricing model is thebetter strategy in actual trading. Ater considering the transaction costs, usingthe ECM model is the better mothed.
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