The Effect Of Futures Markets On Spot Market Volatility
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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.
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.
The Effect Of Futures Trading On Cash Market Volatility
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Author : Gary Robinson
language : en
Publisher:
Release Date : 1993
The Effect Of Futures Trading On Cash Market Volatility written by Gary Robinson and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1993 with Finance categories.
Price Effects Of Financial Futures Trading
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Author : David Cohen
language : en
Publisher:
Release Date : 1982
Price Effects Of Financial Futures Trading written by David Cohen and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1982 with Commodity exchanges categories.
There has been much concern voiced over the possible spot market volatility effects of the new financial futures markets, particularly in a study by the Federal Reserve Board and the Treasury Department regarding Treasury instrument futures markets. This study is designed to provide evidence on the spot price volatility effects of futures trading in 90-day Treasury Bills, The method of analysis is to first identify periods of time that are roughly similar in their overall capital market volatility, but differ in that one period is before TBill futures trading began and its comparable period is after TBill futures trading began. Next several econometric techniques are used to estimate models of interest rate determination. The estimation produces measures of spot TBill rate volatility for each of the comparable periods which are then used in a pairwise fashion to ascertain the spot price volatility effects of futures trading. The interest rate models come from the rather large body of macroeconomics literature dealing with the formation of interest rates. The econometric techniques span different assumptions imposed on the models and each technique provides consistent estimates of the model parameters under the stated conditions. Further, simple analysis of daily and weekly TBill rates is performed to provide continuity with studies of futures market spot price effects in other commodities. The results of all the statistical tests suggest that Treasury Bill futures trading does not increase spot market volatility during relatively stable periods of capital market activity, but is associated with increased spot Treasury Bill market volatility during times when overall capital market conditions are volatile. These results indicate that Treasury Bill futures trading alone does not increase spot market volatility, contrary to the hypothesis that simply the existence of financial futures trading destabilizes the underlying spot market.
Futures Trading And The Level And Volatility Of Spot Prices
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Author : Ronald Britto
language : en
Publisher:
Release Date : 1985
Futures Trading And The Level And Volatility Of Spot Prices written by Ronald Britto and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1985 with Agricultural prices categories.
The Effect Of Contemporaneous Futures Market Volume On Spot Market Volatility
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Author : John L. G. Board
language : en
Publisher:
Release Date : 1997
The Effect Of Contemporaneous Futures Market Volume On Spot Market Volatility written by John L. G. Board and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1997 with Futures market 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.
The Impact Of The Introduction Of Future Contracts On Spot Contracts Volatility For The Oil Market
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Author : Joseph Maarawi
language : en
Publisher:
Release Date : 2015
The Impact Of The Introduction Of Future Contracts On Spot Contracts Volatility For The Oil Market written by Joseph Maarawi and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015 with Dissertations, Academic categories.
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.