The economic value of stocks and call options on the Swedish financial market

The intense trading activity and the very existence of organized stock option markets suggest that these financial contracts provide noticeable economic benefits as compared with trades on the stock market. In this paper, we test the efficiency of recursive optimization strategies on a combined portfolio of stocks and call options series listed on the Swedish stock market. For comparison, the same recursive optimization is performed on a portfolio purely consisting of stocks. The portfolio efficiency of the recursive optimization strategy is also compared with results obtained with call options using a Black–Scholes strategy.