Download or read book The Effect of Contemporaneous Futures Market Volume on Spot Market Volatility written by John L. G. Board and published by . This book was released on 1997 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Effect of Futures Trading on Spot Market Volatility written by Brajesh Kumar and published by . This book was released on 2011 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.

Download or read book Price Volatility Trading Volume and Market Depth written by Hendrik Bessembinder and published by . This book was released on 1992 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt:

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 Index Futures Trading and Spot Market Volatility Evidence from an Emerging Market written by Kiran and published by . This book was released on 2007 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.

Download or read book Unconditional First Moment and Conditional Second Moment Effects written by Gerard Gannon and published by . This book was released on 2001 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt: A theoretical framework is developed in order to consider effects of mis-specification in either first and/or second moment equations on resultant conditional volatility parameter estimates. The conditional volatility model is considered as a special case of a general stochastic volatility structure. Conditions necessary for the behaviour of the underlying asset price processes to approximate a diffusion limit are considered as the observation interval approaches 0 (d~0). The asymptotic distribution of the measurement error process may not be obtainable as d~0 if these conditions are violated. The relative impact of mis-specification of drift in mean and drift in conditional volatility is the focus. Market features such as bid/ask bounce effects in futures and stock price processes and non-synchronous trading effects in cash index processes are explored within this framework. Other mis-specifications in mean equations such as over-differencing are jointly explored. The most important effect is mis-specification of conditional volatility equations by failing to account for contemporaneous market trading and volume of trade effects. Empirical examples are provided employing Australian, U.S. and U.K. cash index, stock price and futures price data sampled from transactions records. These estimates help quantify the relative effects on conditional volatility estimates from mis-specifying the dynamics and sampling interval for these asset price mean equations. The relative importance of mis-specification of conditional volatility equations from incorrect exclusion of variables is seen to be crucial. Volume of trade, market opening/closing and other contemporaneous volatility effects in parallel processes are allowed to enter conditional volatility equations to highlight this issue.

Download or read book The Effect of Futures Markets on Spot Market Volatility written by Alan Picard and published by . This book was released on 2009 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Futures markets have been blamed for higher volatility in the underlying asset market. A popular belief is that trading activity in futures markets encourage speculation, which destabilizes the spot market. The alleged destabilization takes the form of higher spot market volatility. On the other hand, a favorable view is that futures trading helps stabilizing the underlying market and leads to more complete markets and enhanced information flows. The numerous papers that have studied the effect of the introduction of derivatives on the underlying assets have obtained different results. This paper analyses the effect of the introduction of futures markets on the underlying market for Canadian bankers' acceptances. More specifically this study investigates the contention that the introduction of the futures (BAX) on the Montreal exchange on April 24 th 1988 has affected the volatility of the underlying asset. To study this effect, several models and approaches are used such as the GARCH process and others models and approaches formulated by several academics who studied this issue for other underlying spot markets.

Download or read book IMF Staff papers Volume 45 No 3 written by International Monetary Fund. Research Dept. and published by International Monetary Fund. This book was released on 1998-01-01 with total page 168 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper presents international evidence on the determinants of trade dynamics. It provides some new empirical perspectives on the relationship between international trade and macroeconomic fluctuations in industrial economies. A comprehensive set of stylized facts concerning fluctuations in trade variables and their determinants is presented. A measure of the quantitative importance of international trade for the propagation of domestic business cycles is then constructed, focusing on the role of external trade as a catalyst for cyclical recoveries.

Download or read book Stock Index Futures written by Charles M.S. Sutcliffe and published by Routledge. This book was released on 2018-01-18 with total page 844 pages. Available in PDF, EPUB and Kindle. Book excerpt: The global value of trading in index futures is about $20 trillion per year and rising and for many countries the value traded is similar to that traded on their stock markets. This book describes how index futures markets work and clearly summarises the substantial body of international empirical evidence relating to these markets. Using the concepts and tools of finance, the book also provides a comprehensive description of the economic forces that underlie trading in index futures. Stock Index Futures 3/e contains many teaching and learning aids including numerous examples, a glossary, essay questions, comprehensive references, and a detailed subject index. Written primarily for advanced undergraduate and postgraduate students, this text will also be useful to researchers and market participants who want to gain a better understanding of these markets.

Download or read book Does the Introduction of Futures on Emerging Market Currencies Destabilize the Underlying Currencies written by Ms.Laura E. Kodres and published by International Monetary Fund. This book was released on 1998-02-01 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: Recent interest in futures contracts on emerging market currencies has raised concerns among some central bank authorities about their ability to maintain stable currencies. This paper presents empirical results examining the influence of the Mexican peso, the Brazilian real, and the Hungarian forint futures contracts on the respective spot markets. While measures of linear dependence and feedback indicate strong connections between the respective markets, futures volatility does not significantly explain spot market volatility, nor does it increase after futures introductions. To account for the characteristics of the spot and futures returns a SWARCH model has been employed to estimate volatility.

Download or read book The Economics of Food Price Volatility written by Jean-Paul Chavas and published by University of Chicago Press. This book was released on 2014-10-14 with total page 394 pages. Available in PDF, EPUB and Kindle. Book excerpt: "The conference was organized by the three editors of this book and took place on August 15-16, 2012 in Seattle."--Preface.

Download or read book The Relative Effectiveness of Spot and Derivatives Based Intervention written by Milan Nedeljkovic and published by International Monetary Fund. This book was released on 2017-01-24 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies the relative effectiveness of foreign exchange intervention in spot and derivatives markets. We make use of Brazilian data where spot and non-deliverable futures based intervention have been used in tandem for more than a decade. The analysis finds evidence in favor of a significant link between both modes of intervention and the first two moments of the real/dollar exchange rate. As predicted by theory for the case of negligible convertibility risk, the impact of spot market intervention in our baseline sample is strikingly similar to that achieved through futures based intervention worth an equivalent amount in notional principal.

Download or read book An Introduction to Wavelets and Other Filtering Methods in Finance and Economics written by Ramazan Gençay and published by Elsevier. This book was released on 2001-10-12 with total page 383 pages. Available in PDF, EPUB and Kindle. Book excerpt: An Introduction to Wavelets and Other Filtering Methods in Finance and Economics presents a unified view of filtering techniques with a special focus on wavelet analysis in finance and economics. It emphasizes the methods and explanations of the theory that underlies them. It also concentrates on exactly what wavelet analysis (and filtering methods in general) can reveal about a time series. It offers testing issues which can be performed with wavelets in conjunction with the multi-resolution analysis. The descriptive focus of the book avoids proofs and provides easy access to a wide spectrum of parametric and nonparametric filtering methods. Examples and empirical applications will show readers the capabilities, advantages, and disadvantages of each method. - The first book to present a unified view of filtering techniques - Concentrates on exactly what wavelets analysis and filtering methods in general can reveal about a time series - Provides easy access to a wide spectrum of parametric and non-parametric filtering methods

Download or read book Journal of Econometrics written by and published by . This book was released on 1998 with total page 830 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Any Silver Linings The London Silver Fixing s Impact on Public Silver Markets Before and After the Introduction of Contemporaneous Futures Trading written by Andrew Caminschi and published by . This book was released on 2015 with total page 83 pages. Available in PDF, EPUB and Kindle. Book excerpt: Since 1897 the London Silver Fixing has conducted a daily auction which, to this day, sets the daily benchmark price for the precious metal. This private pricing club functions alongside active public markets for silver, including the physical spot and futures markets. This empirical market microstructure study analyses publicly traded silver instruments to assess the impact the fixing has on public markets. The study spans fourteen years of fixings, from January 2000 to December 2013, which includes the introduction of contemporaneous silver futures trading in late 2006. It finds statistically significantly lower prices around the time of the fixing in both spot and futures markets, elevated levels of trade volume and price volatility immediately following the fixing's start, well before the conclusion of the fixing and the publication of its outcome. Further, it finds statistically significant return advantages in the four minutes following the start of the fixing for informed traders while no significant returns follow the publication of the fixing outcome. Trades in the opening minutes of the fixing are highly predictive of the price direction of the fixings. The size and significance of these results increase after the introduction of contemporaneous futures trading.

Download or read book Slow Moving Capital written by Mark Mitchell and published by . This book was released on 2007 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study three cases in which specialized arbitrageurs lost significant amounts of capital and, as a result, became liquidity demanders rather than providers. The effects on security markets were large and persistent: Prices dropped relative to fundamentals and the rebound took months. While multi-strategy hedge funds who were not capital constrained increased their positions, a large fraction of these funds actually acted as net sellers consistent with the view that information barriers within a firm (not just relative to outside investors) can lead to capital constraints for trading desks with mark-to-market losses. Our findings suggest that real world frictions impede arbitrage capital.

Download or read book The Microstructure of Foreign Exchange Markets written by Jeffrey A. Frankel and published by University of Chicago Press. This book was released on 2009-05-15 with total page 358 pages. Available in PDF, EPUB and Kindle. Book excerpt: The foreign exchange market is the largest, fastest-growing financial market in the world. Yet conventional macroeconomic approaches do not explain why people trade foreign exchange. At the same time, they fail to explain the short-run determinants of the exchange rate. These nine innovative essays use a microstructure approach to analyze the workings of the foreign exchange market, with special emphasis on institutional aspects and the actual behavior of market participants. They examine the volume of transactions, heterogeneity of traders, the time of day and location of trading, the bid-ask spread, and the high level of exchange rate volatility that has puzzled many observers. They also consider the structure of the market, including such issues as nontransparency, asymmetric information, liquidity trading, the use of automated brokers, the relationship between spot and derivative markets, and the importance of systemic risk in the market. This timely volume will be essential reading for anyone interested in the economics of international finance.