Trading Activity in the Treasury Futures Market and Its Role in Futures Price Fluctuations

2008 ◽  
Author(s):  
Wenchao Liao
Keyword(s):  
Futures Market ◽  
Trading Activity ◽  
Price Fluctuations ◽  
Futures Price ◽  
Treasury Futures

scholarly journals An Empirical Study on Effects of US Treasury Futures Market on the KTB Futures Market and Its Information Transfer Effect – Mainly after the Global Financial Crisis

2015 ◽  
Vol 7 (12) ◽  
pp. 262
Author(s):  
Kim Sung-Hyun ◽  
Park Sang-Bum
Keyword(s):  
Financial Crisis ◽  
Information Transfer ◽  
Global Financial Crisis ◽  
Futures Market ◽  
Future Market ◽  
Risky Assets ◽  
The Us ◽  
Treasury Market ◽  
The Global Financial Crisis ◽  
Treasury Futures

Since the Global Financial Crisis in 2008, funds have been moved to safe assets from previously preferred risky assets on a global basis. Moreover, the financial crisis ignited in the U.S.A. led to strong quantitative easing policies, which played a major variable in the monetary policies of the major countries. So, the US treasury yield rates and Korean counterpart have showed signs of being synchronized. On the other hand, foreigners’ investments on Korean bonds became accelerated; the amount invested to Korean treasury by foreigners as well as their influence in the Korean treasury market has been expanded. Particularly, investment on the 10 year treasury bonds has increased, which spread influence of the Korean treasury market. In this regard, the study analyzed effects of the US treasury market on Korean counterpart. In order to analyze the volatility transfer effects from US treasury market to the KTB future market, in consideration of the synchronized maturity dates of the treasury and the officially announced prices, data on US 10 year treasury futures index and Korean 10 year treasury futures index . GARCH model was used for empirical analysis. Effects of the daily volatility and direction of US 10 year treasury futures index on the Korean counterpart was analyzed. Through the analysis, it was confirmed that information was transferred to the yield of Korean 10 year treasury futures index from the US counterpart. The study will be able to help establish more rational and efficient strategy for bond investment and operation.

The Unbiasedness and Hedging Effectiveness in KOSPI200 Futures Market

2007 ◽  
Vol 15 (1) ◽  
pp. 73-100
Author(s):  
Seok Kyu Kang
Keyword(s):  
Risk Management ◽  
Risk Premium ◽  
Futures Market ◽  
Spot Price ◽  
Sample Period ◽  
Futures Prices ◽  
Spot Prices ◽  
Hedging Effectiveness ◽  
Futures Price ◽  
Rolling Windows

This study is to examine the unblasedness hypothesis and hedging effectiveness in KOSPI20() futures market. The unbiasedness and efficiency hypothesis is carried out using a cointegration methodology. And hedging effectiveness is measured by comparing hedging performance of the naive hedge model, OLS hedge model. and constant correlation bivariate GARCH (1. 1) hedge model based on rolling windows. The sample period covers from May. 3. 1996 to December. 8, 2005. The empirical results are summarized as follows: First, there exists the cOintegrating relationship between realized spot prices and futures prices of the 10 day. 22 day. 44 day. and 59 day prior to maturity. Second. futures prices of backward the 10 day. 22 day. 44 day from maturity provide unbiased forecasts of the realized spot prices. The KOSPI200 futures price is likely to predict accurately future KOSPI200 spot prices without the trader having to pay a risk premium for the privilege of trading the contract. Third. for shorter maturity. the futures price appears to be the best forecaster of spot price. Forth, bivariate GARCH hedging effectiveness outperforms the naive and OLS hedging effectiveness. The implications of these findings show that KOSPI200 futures market behaves as unbiased predictor of future spot price and risk management instrument of KOSPI200 spot portfolio.

Effect of Margin Requirement on Default Risk and Liquidity in the Korean Futures Market

2016 ◽  
Vol 24 (2) ◽  
pp. 269-299
Author(s):  
Hak-Kyum Kim ◽  
Jinwoo Park
Keyword(s):  
Default Risk ◽  
Effective Means ◽  
Simulation Method ◽  
Futures Market ◽  
Stock Index ◽  
Stock Index Futures ◽  
Trading Activity ◽  
Futures Trading ◽  
Margin Requirements ◽  
Margin Requirement

Margin requirements are often viewed as an effective policy tool to prevent the default risk and maintain market stability. For the Korean futures market, this paper examines whether the margin requirements work normally as a tool to prevent default risk and margin changes have impact on futures trading activity. KOSPI200 stock index futures, USD (U.S. Dollar) futures, and 3-year KTB (Korean Treasury Bond) futures are included in the sample for the period from 2010 to 2015. Using the simulation method assuming the worst situation, we find that the possibility of default occurs once for KOSPI200 futures, twice for 3-year KTB futures, and 7 times for USD futures during the sample period. This result suggests that active margin requirement policy is necessary to prepare for financial market turbulence. In addition, we find that the margin changes do not have a significant impact on the futures trading activity, suggesting that decreases in margins are not effective means to improve liquidity in the Korean futures market

Is China the price taker in soybean futures?

2015 ◽  
Vol 7 (3) ◽  
pp. 389-404 ◽  
Author(s):  
Bruce Jianhe Liu ◽  
Yubin Wang ◽  
Jingjing Wang ◽  
Xin Wu ◽  
Shu Zhang
Keyword(s):  
Genetically Modified ◽  
Spillover Effects ◽  
Futures Market ◽  
Error Distribution ◽  
Conditional Heteroskedasticity ◽  
Subprime Crisis ◽  
Genetically Modified Soybean ◽  
Content Type ◽  
Generalized Error Distribution ◽  
Futures Price

Purpose – The purpose of this paper is to examine whether China is still a passive price taker from the US soybean futures, or instead domestic futures market has developed certain degrees of pricing power through time. The finding helps to identify the importance of China soybean futures in the perspective of portfolio selection for international futures traders. If China soybean futures market is no longer a price taker after the subprime crisis, traders need to include it as a separate category in their portfolio. Design/methodology/approach – This paper uses exponential generalized autoregressive conditional heteroskedasticity-generalized error distribution (EGARCH-GED) and generalized autoregressive conditional heteroskedasticity-generalized error distribution (GARCH-GED) models to test spillover effects between Dalian Commodity Exchange (DCE) and Chicago Board of Trade (CBOT) soybean futures. The authors divide daily samples into three subperiods based on the subprime crisis. Three research questions – whether China is still the price taker, the importance of Chinese soybean futures in international futures portfolio selection, and the influences of subprime crisis on soybean futures volatility relationship – are examined by comparing estimation results through time and different contracts. Findings – The spillover effect from CBOT soybean futures to DCE No. 1 soybean futures becomes weaker through time. China is no longer a soybean futures price taker after the subprime crisis. The authors also find the shocks of bearish news on DCE soybeans are greater than those of bullish news. Potential volatility of DCE in long positions is bigger than that in short positions. Practical implications – China is the largest soybean importer. DCE is a very important futures market for non-genetically modified soybeans. It is necessary for both international and domestic futures traders to understand the changes in international soybean futures price relationship and take corresponding strategies. It is also important for market to realize that DCE soybean futures are to a less degree price taker after the subprime crisis. Originality/value – The paper applies EGARCH-GED and GARCH-GED models to identify changes in spillover effects before, during, and after the subprime crisis. Different from other studies, this paper finds after the subprime crisis, China is no longer the soybean futures price taker. This paper also compares the spillover effects of non-genetically modified soybean futures (No. 1 soybean futures) with genetically modified soybean futures (No. 2 soybean futures).

scholarly journals The Impact of Futures Price Volatility to Spot Market : Case of Coffee in Indonesia

2019 ◽  
Vol 15 (1) ◽  
pp. 1-15 ◽  
Author(s):  
Anis Erma Wulandari ◽  
Harianto Harianto ◽  
Bustanul Arifin ◽  
Heny K Suwarsinah
Keyword(s):  
Exchange Rate ◽  
Price Volatility ◽  
Spot Market ◽  
Futures Market ◽  
Spot Price ◽  
Price Risk ◽  
Price Inflation ◽  
Spot Prices ◽  
Futures Price ◽  
The Impact

Indonesia is the world 4th largest coffee producer after Brazil, Vietnam and Colombia with export potential and higher national consumption concluded in 2017 while the coffee production was relatively stagnant. This was led the producer to not only the production risk but also the price risk which then emphasize the importance of futures markets existence as price risk management. This study is performed to examine the impact of futures price volatility to spot market using ARCH-GARCH toward primary data of coffee futures and spot prices of 1172 trading days starting from January 2014 to June 2018. The ARCH-GARCH analysis result indicates that futures price volatility and monetary variables are impacting the volatility of spot price. Arabica spot price volatility is impacted by volatility of Arabica futures price, inflation and exchange rate while Robusta spot price is impacted by Robusta futures price volatility and exchange rate. This is confirming that futures market plays dominant role in spot price discovery. Local futures and spot prices are also found to be significantly influenced by volatility of offshore futures prices which indicates that emerging country futures market is actually influenced by offshore futures market which the price itself used as price reference.

A Comparative Analysis of Informational Efficiency of KOSDAQ50 and KOSPI200 Index Futures

2003 ◽  
Vol 11 (2) ◽  
pp. 27-49
Author(s):  
Bae Gi Hong ◽  
Su Jae Jang
Keyword(s):  
Futures Markets ◽  
Market Price ◽  
Futures Market ◽  
Spot Price ◽  
Informational Efficiency ◽  
Information Efficiency ◽  
Index Futures ◽  
Volume Relationship ◽  
Futures Price ◽  
Volume Relation

This paper examines the information efficiency of KOSDAQ50 and KOSPI200 index futures markets. The study analyzes and compares both markets in three respects : 1) price discovery (lead-lag relationship between spot and futures markets.), 2) volatility-volume relationship, and 3) mispricings between spot and futures prices. The first, analysis shows the in the KOSPI200 market, futures price leads spot price. While spot price leads futures price in the KOSDAQ50 market. The second analysis shows that the volatility-volume relation is positive in the KOSPI200 futures market, supporting the hypothesis of mixture of distribution. In contrast, there is little relation between volume and volatility in the KOSDAQ50 futures market. This result casts doubt that the futures market price reflects information. The last analysis shows that the magnitude of mispricing becomes smaller with more volume in the KOSPI200 futures market, while it becomes larger with more volume in the KOSDAQ50 futures market. The overall results imply that the KOSDAQ50 futures market is less informationally efficient that the KOSPI200 market. The inefficiency appears due to the lack of institutional investor participation, especially securities firms, in making up the market.

Market Timing Skill and Trading Activity in Taiwan’s Retail-Dominated Futures Market

2021 ◽  
pp. jpm.2021.1.249
Author(s):  
Shean-Bii Chiu ◽  
Jason Hsu ◽  
Hsing-Kuo Lai ◽  
Phillip Wool
Keyword(s):  
Market Timing ◽  
Futures Market ◽  
Trading Activity
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