Derivatives Trading And Spot Market Volatility
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Derivatives Trading And Spot Market Volatility
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Author : David Cronin
language : en
Publisher:
Release Date : 1992
Derivatives Trading And Spot Market Volatility written by David Cronin and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1992 with Foreign exchange futures categories.
Impacts Of Derivative Markets On Spot Market Volatility And Their Persistence
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Author : Chulwoo Han
language : en
Publisher:
Release Date : 2014
Impacts Of Derivative Markets On Spot Market Volatility And Their Persistence written by Chulwoo Han and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014 with categories.
In this article, I investigate the impacts of futures and options markets on the volatility of the underlying market with a focus on their persistence over time. Empirical study yields several interesting results that often contrast with previous findings. it suggests that the impacts on the spot market volatility depends on the quality of new information generated by derivatives trading. Futures market reduces spot market volatility by providing new, material information, but options market generates noisy information which results in increase in volatility and decrease in its sensitivity to price change. While the impact by futures persists, that of options mostly disappears as the market matures. This is perhaps because futures market is mainly driven by informed, experienced participants, while options market attracts new, inexperienced investors. It would be worth revisiting other markets with the methods in this study and testing validity of the conclusions made in previous studies.
Effect Of Futures Trading On Spot Market Volatility
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Author : Brajesh Kumar
language : en
Publisher:
Release Date : 2011
Effect Of Futures Trading On Spot Market Volatility written by Brajesh Kumar and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011 with categories.
This study investigates the relationship between futures trading activity and spot market volatility for agricultural, metal, precious metals and energy commodities in Indian commodity derivatives market. This article contributes to the debate whether the futures trading in Indian commodity futures market stabilizes or destabilizes spot market. We explore this issue by modeling contemporaneous as well as dynamic relationship between spot volatility and futures trading activity including trading volume (speculative/day trading) and open interest (hedging). Following Bessembinder and Senguin (1992), we examine contemporaneous relationship through augmented GARCH model in which spot volatility is modeled as GARCH (1,1) process and trading activity is used as explanatory variable. We also decompose futures trading volume and open interest series into expected and unexpected component. The lead-lag relationship between spot price volatility and futures trading volume and open interest is investigated through VAR model. Granger causality tests, forecast error variance decompositions and impulse response function are used to understand the dynamic relationship between these variables. We found that both expected and unexpected futures trading volume affects contemporaneous spot volatility positively. However, in case of agricultural commodities only unexpected volume affects the contemporaneous spot volatility. Granger causality tests, forecast error variance decompositions and impulse response function confirm that the lagged unexpected volatility causes spot price volatility for all commodities. The effect of speculative/day trading activity measured by trading volume on spot market volatility is positive. However, hedging activity measured by open interest does not show significant effect on spot market volatility. We do not find any effect of spot volatility on futures trading activity for most of the commodities.
Simultaneity And Causality Between Derivatives Trading And Spot Market Volatility In The Uk
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Author : Kyriacos Kyriacou
language : en
Publisher:
Release Date : 1998
Simultaneity And Causality Between Derivatives Trading And Spot Market Volatility In The Uk written by Kyriacos Kyriacou and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1998 with categories.
Futures Trading And Spot Market Volatility In India
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Author : Pretimaya Samanta
language : en
Publisher: LAP Lambert Academic Publishing
Release Date : 2012-01
Futures Trading And Spot Market Volatility In India written by Pretimaya Samanta and has been published by LAP Lambert Academic Publishing this book supported file pdf, txt, epub, kindle and other format this book has been release on 2012-01 with categories.
Derivatives in the securities markets were launched mainly with the twofold objective of risk transfer and to enhance liquidity in the underlying cash market and thereby ensuring better market efficiency. In the late 1990s, various derivative instruments were introduced in the equity segment of major markets worldwide. It further complicated the volatility behavior of these markets as derivatives opened new avenues for hedging and speculation. Since futures trading encourage speculation, the debate on the impact of speculators on the cash market volatility intensified with the introduction of futures trading. This constitutes the main research problem of this study and the objectives have been set out in accordance to this phenomenon of the derivatives market. The current research work examines the effect of the introduction of futures trading on the volatility of the underlying cash market in India. The standard univariate GARCH model has been used to capture the time-varying nature of volatility and volatility clustering phenomenon in the data. This research study adds a new dimension to the existing literature on futures trading and will be useful to all the market participants.
A Study On Impact Of Banknifty Derivatives Trading On Spot Market Volatility In India
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Author : Suresh N.
language : en
Publisher:
Release Date : 2018
A Study On Impact Of Banknifty Derivatives Trading On Spot Market Volatility In India written by Suresh N. and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018 with categories.
The paper targets to explore on the impact of BANKNIFTY derivatives transaction on spot market volatility in India. The scope is confined will equity future contracts. The period of study from 1st April, 2010 to 31st March, 2017, is chosen to observe the influence of trading the derivatives on volatility of spot market after global financial crisis. The data for stocks comprises of daily closing prices of near month contract and also equity market. The methods used are descriptive statistics, ADF test and GARCH model. The volatility is declined for BANKNIFTY stocks. But the diagnostic checking concludes that serial correlation and ARCH effects are desirable for the model.
Index Futures Trading And Spot Market Volatility Evidence From An Emerging Market
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Author : Kiran
language : en
Publisher:
Release Date : 2007
Index Futures Trading And Spot Market Volatility Evidence From An Emerging Market written by Kiran and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007 with categories.
Studies on the impact of futures introduction on the volatility of the underlying index report no increase in the spot volatility after the futures introduction. However, the prior studies do not comment on how exactly the information transmits from the futures market to the spot market. This paper focuses on investigating whether the change in the structure of spot volatility evolution process is due to the futures trading activity. The relation between the Futures trading activity (measured through trading volume and open interest) and spot index volatility is documented, following Bessembinder and Seguin (1992), by partitioning trading activity into expected and shock components by an appropriate ARMA model. The series are then appended in the variance equation through an appropriate ARMA-GARCH model, following Gulen and Mayhew (2000). Further, the study examines the effect of the Sept. 11th terrorist attack has had on the Nifty spot-futures relation.The study concludes that post the Sept. 11th attack, the relation between Futures Trading Activity and Spot volatility has strengthened, implying that the market has become more efficient in assimilating the information into its prices. This is evident in both volume and open interest (expected and activity shock) being significant post Sept. 11 while not being significant pre Sept. 11.
Stock Index Futures Trading And Spot Market Volatility
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Author : George Karathanassis
language : en
Publisher:
Release Date : 2006
Stock Index Futures Trading And Spot Market Volatility written by George Karathanassis and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2006 with categories.
This paper investigates possible spill-over effects on the Spot Market due to the initiation of Futures contracts. According to many analysts there still exists a puzzle regarding the stabilization or destabilization effects of futures contracts. Although the speculative forces (uninformed investors) tend to destabilize the market, rational hedging strategies and the transition of risk allow for stabilization shift. In order to investigate this issue, many researchers during the last decade, have utilized the GARCH framework enriched to capture many stylized financial features, such as the asymmetric response to news and leptokurtosis. However, in this paper the GARCH framework is extended to allow for skewness in the return's distribution and to examine the timing of possible structural changes, while the conditional mean of the process is adjusted to account for time-varying risk premia and for the day of the week effects decomposition. Furthermore, the distinguishing feature of this paper is the SWARCH econometric model, which enables a dynamic regime shifting through a Markov Chain transition matrix. According to the empirical findings on the FTSE-20/ASE futures contract, there exists a significant stabilization effect on the long run, while in the short run this seems to be non-robust.
The Effect Of Futures Markets On Spot Market Volatility
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Author : Alan Picard
language : en
Publisher:
Release Date : 2009
The Effect Of Futures Markets On Spot Market Volatility written by Alan Picard and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2009 with categories.
Asset Pricing Real Estate And Public Finance Over The Crisis
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Author : A. Carretta
language : en
Publisher: Springer
Release Date : 2013-02-03
Asset Pricing Real Estate And Public Finance Over The Crisis written by A. Carretta and has been published by Springer this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013-02-03 with Business & Economics categories.
The current financial crisis started from the US real estate market and after, though the increase of risk premium requested by investors and due to the lack of liquidity of all financial markets, it became a world financial crisis. A detailed analysis during the crisis focuses attention on asset management, the real estate and public sector.