Download or read book Cash Settlement and Futures Price Volatility written by Leo H. Chan and published by . This book was released on 2003 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The Chicago Mercantile Exchange (CME) abandoned the live hog futures contract (physical delivery) in December 1996 and replaced it with the lean hog futures contract (cash settlement), with the intention of improving the effectiveness of the contract as a risk management tool. This paper applies implied volatility derived from options on live/lean hog futures contracts to examine the possible effects of cash settlement on futures price volatility. Using different data windows and applying different model specifications, it is found that the hog futures price has become less volatile, thus improving the risk management function of the futures contract, since the adoption of cash settlement.

Download or read book Using High Low Open and Closing Prices to Estimate the Effects of Cash Settlement on Futures Prices written by Leo H. Chan and published by . This book was released on 2001 with total page 21 pages. Available in PDF, EPUB and Kindle. Book excerpt: Prior to 1986, any opening position on feeder cattle futures contract must be settled with physical delivery after the last trading day. Due to dwindling commercial interests, Chicago Mercantile Exchange (CME) subsequently replaced the system with the cash settlement method. It was argued that cash settlement would help reduces the futures price's volatility. In this paper, we adopted stochastic volatility models to investigate this conjecture. The models allow for time varying volatility. Using 4 estimators based on mixtures of high, low, open and close prices, we found all estimators conclude that the volatility of the feeder cattle futures price decreased after switching from physical delivery to cash settlement. The change in the contract specification therefore enhances price discovery and risk management functions of the futures market. Concerning the higher moments of the volatility, different conclusions were derived. Range data, the Parkinson and the Rogers-Satchell estimators all indicate that cash settlement led to a reduction in the volatility of volatility.

Download or read book Measuring the Impacts of Cash Settlement written by Leo H. Chan and published by . This book was released on 2001 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt: Prior to 1986, any opening position on feeder cattle futures contract must be settled with physical delivery after the last trading day. Due to dwindling commercial interests, Chicago Mercantile Exchange (CME) subsequently replaced the system with the cash settlement method. It was argued that cash settlement would help improve the convergence between cash and futures prices and reduce the basis variability. In this paper, we adopted stochastic volatility models to investigate this conjecture. The models allow for time varying volatility. We found strong evidence of reduction in basis and in basis variance after cash settlement. Moreover, cash settlement induced a change in the structural relationship between cash and futures prices. The futures market has become more efficient after the change in settlement methods.

Download or read book The Review of Futures Markets written by and published by . This book was released on 1993 with total page 520 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Availability and Settlement of Individual Stock Futures and Options Expiration Effects written by Donald D. Lien and published by . This book was released on 2008 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examines whether the expiration-day effects of stock options traded in Australian Stock Exchange on return, volatility, trading volume, and temporary price changes of individual stocks vary with the availability and the settlement method of individual stock futures contracts. Using transaction data of the stocks that have both options and futures contacts from 1993 to 1997, we find that options expiration has significant effects on return and volatility of the underlying stocks in absence of individual stock futures. After introduction of a cash-settled stock futures contract, the effects decrease notably. However, the switch of a futures contract from cash settlement to physical delivery promotes the expiration effects on return and volatility and boosts temporary price changes on expiration days. Finally, options expiration has little effect on trading volume. Trading activity tends to behave normally regardless whether stock futures contracts are available or not.

Download or read book Settlement Method of Eurodollar Futures and Expiration Day Effects written by Tae H. Park and published by . This book was released on 2013 with total page 14 pages. Available in PDF, EPUB and Kindle. Book excerpt: Four times a year, Eurodollar futures contracts are settled by cash to a final settlement price that is tied to spot three-month LIBOR. The LIBOR used in the settlement is determined by the Chicago Mercantile Exchange after conducting two surveys of major banks on the last hour of settlement. This paper tests for abnormal changes in the volatility of Eurodollar futures prices during the time of survey on expiration days. In contrast to the recent studies on the effects of the release of public information on derivative markers, this study focuses on the release of private information. We specifically test whether private information contained in the settlement survey of the participating banks influences market activity. Volatility series are examined for expiring and nearby contracts using the price changes in fifteen minute intervals for the period June 1982 to June 1992. Once the effects of government announcements are controlled for, our results indicate that, for the expiring contracts, volatility is reduced during the time of survey. perhaps due to reduced open interest and activity near the expiration hour. However, the price volatility of the nearest contracts increases during the rime of the survey on expiration days. This effect is more pronounced at the beginning of the survey rime, between 8:00 and 8:15 Chicago time. This result sheds new light on the importance of the release of private information on derivatives markers.

Download or read book The Effect of Futures Trading on Cash Market Volatility written by Gary Robinson and published by . This book was released on 1993 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Exploring The Effect of Physical Delivery Verses Cash Settled Futures Contracts with the Prospective of Obligatory Delivery in Islamic Contract of Sales written by Farzan Adil and published by . This book was released on 2019 with total page 23 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study emphasizes that either physical delivery or cash settlement method for futures contract is better for precious metal such as gold and the storable commodities like rice, wheat, sugar, as well as check the effect of both settlement method on the volatility of futures and spot price, to examine this issue we use bivariate GARCH model to discover the interaction between the spot price return and futures price return, the result shows basis variability of spot price and futures prices returns was substantially reduced in the case of physical delivery as compare to the cash settlement of same commodities, which means the physical delivery is more reliable for the rice, wheat, sugar, and gold futures contracts. In addition physical delivery settlement method is more better than the cash settlement because it cover the gap of demand and supply in the market which effect on price and the physical delivery method is more reliable, as it restrict the liquidation of futures contact which decline the price and provide the social benefit as well.

Download or read book Review of Research in Futures Markets written by and published by . This book was released on 1992 with total page 518 pages. Available in PDF, EPUB and Kindle. Book excerpt: Consists of the proceedings of seminars on futures markets held by the Chicago Board of Trade.

Download or read book Establishing a Foreign Exchange Futures Market in China written by Mr. Zhongxia Jin and published by International Monetary Fund. This book was released on 2021-11-12 with total page 22 pages. Available in PDF, EPUB and Kindle. Book excerpt: During China’s transition toward a more flexible exchange rate, it is essential to further develop its foreign exchange (FX) derivatives markets to meet the growing hedging needs associated with greater exchange rate fluctuations. Although over-the-counter (OTC) FX derivatives markets already exist in China, it lacks a FX futures market that offers critical complementarities. With standardized products, greater transparency and centralized oversight, a FX futures market can better satisfy the hedging needs of small and medium-sized enterprises and enhance regulatory efficiency. To address concerns regarding whether FX futures market will amplify the volatility of spot exchange rates, this paper analyzes the impact of establishing FX futures markets on spot market volatility using data from major emerging market economies. The result shows that FX futures market is not empirically associated with an increase in spot market volatility; in some cases, it is even associated with a decrease in spot market volatility. This paper further suggests that for a well-functioning FX futures market to be established, it is essential for China to substitute the inefficient documentation requirement of underlying exposures with a new set of market-oriented measures for the purpose of prudent regulation.

Download or read book The European Options and Futures Markets written by Stuart K. McLean and published by Irwin Professional Publishing. This book was released on 1991 with total page 1136 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Expiration and Delivery on the No 11 Sugar Futures Contract written by Thomas Joseph McNeill and published by . This book was released on 1987 with total page 198 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Volatility of Futures Prices written by Jau-Lian Jeng and published by . This book was released on 1991 with total page 354 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book CFTC Report written by and published by . This book was released on 1987 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Derivatives Trading and Spot Market Volatility written by David Cronin and published by . This book was released on 1992 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Option Volatility Pricing Workbook Practicing Advanced Trading Strategies and Techniques written by Sheldon Natenberg and published by McGraw Hill Professional. This book was released on 2017-12-15 with total page 304 pages. Available in PDF, EPUB and Kindle. Book excerpt: Raise your options investing game to a new level through smart, focused practice For decades, Sheldon Natenberg’s Option Volatility & Pricing has been helping investors better understand the complexities of the option market with his clear and comprehensive explanation of trading strategies and risk management. Now, you can raise your performance to a higher level by practicing Natenberg’s methods before you enter the market. Filled with hands-on exercises designed to dramatically increase your knowledge and build your confidence, The Option Volatility and Pricing Workbook provides the necessary tools from which to build a successful options portfolio. Each exercise is preceded by clear description of the principle at hand, and each concludes with in-depth explanations of the correct answers. Hundreds of exercises cover such topics as: •Contract Settlement and Cash Flow•Expiration Profit & Loss•Theoretical Pricing•Volatility•Dynamics of Risk•Synthetic Pricing and Arbitrage•Hedging Strategies•Models and the Real World Success in option markets requires the ability to adapt to constantly changing market conditions. This ability can only be achieved through a full and intimate understanding of the principles of option evaluation, strategy selection, risk management, and market dynamics. Whether you’re a professional or novice trader, a market maker or training manager—The Option Volatility and Pricing Workbook is an invaluable tool for achieving success in this famously tough market.

Download or read book Understanding Futures Markets written by Robert W. Kolb and published by Prentice Hall. This book was released on 1991 with total page 680 pages. Available in PDF, EPUB and Kindle. Book excerpt: This comprehensive reference book surveys the broad sweep of futures markets as they exist today. It explains everything from the basic mechanisms of the markets to the factors involved in pricing futures and managing futures portfolios. Current issues in this volatile area are addressed.