The recent price coupling of many European electricity markets has triggered a fundamental change in the interaction of day-ahead prices, challenging additionally the modeling of the joint behavior of prices in interconnected markets. In this paper we propose a regime-switching AR-GARCH copula to model pairs of day-ahead electricity prices in coupled European markets. While capturing key stylized facts empirically substantiated in the literature, this model easily allows us to 1) deviate from the assumption of normal margins and 2) include a more detailed description of the dependence between prices. We base our empirical study on four pairs of prices, namely Germany-France, Germany-Netherlands, Netherlands-Belgium and Germany-Western Denmark. We find that the marginal dynamics are better described by the flexible skew t distribution than the benchmark normal distribution. Also, we find significant evidence of tail dependence in all pairs of interconnected areas we consider. As applications of the proposed empirical model, we consider the pricing of financial transmission rights and the forecasting of tail quantiles. In both applications, we highlight the effects of the distributional assumptions for the margins and the tail dependence.
{"title":"A Regime-Switching Copula Approach to Modeling Day-Ahead Prices in Coupled Electricity Markets (Pre-print)","authors":"Anca Pircalabu, F. Benth","doi":"10.2139/ssrn.2912312","DOIUrl":"https://doi.org/10.2139/ssrn.2912312","url":null,"abstract":"The recent price coupling of many European electricity markets has triggered a fundamental change in the interaction of day-ahead prices, challenging additionally the modeling of the joint behavior of prices in interconnected markets. In this paper we propose a regime-switching AR-GARCH copula to model pairs of day-ahead electricity prices in coupled European markets. While capturing key stylized facts empirically substantiated in the literature, this model easily allows us to 1) deviate from the assumption of normal margins and 2) include a more detailed description of the dependence between prices. We base our empirical study on four pairs of prices, namely Germany-France, Germany-Netherlands, Netherlands-Belgium and Germany-Western Denmark. We find that the marginal dynamics are better described by the flexible skew t distribution than the benchmark normal distribution. Also, we find significant evidence of tail dependence in all pairs of interconnected areas we consider. As applications of the proposed empirical model, we consider the pricing of financial transmission rights and the forecasting of tail quantiles. In both applications, we highlight the effects of the distributional assumptions for the margins and the tail dependence.","PeriodicalId":306457,"journal":{"name":"ERN: Futures (Topic)","volume":"52 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-09-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116973586","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Indian agricultural commodity futures market is in the nascent stage. Since lifting of ban on futures trading in the beginning of this millennium, it is still facing serious threat from learned and the lay. Like any other futures market, Indian agricultural commodity futures markets are also expected to perform the role of price discovery and risk management. After having outlined the present status of Indian agricultural commodities market, a comprehensive study on the interrelationship between the spot and futures prices of 15 agricultural commodities is carried out to understand the dynamics of the co-integration, price causality and volatility factors which determine the efficiency of those markets for the period which stand different by various economical and market conditions, for arriving at relative conclusions. The Johansen’s co-integration test on the spot and futures data of the 15 agricultural commodities has shown that the spot and futures market were co-integrated). This proved that the market was efficient and the agriculture commodity futures exchanges provided efficient hedge against price risk emerging in respective commodities. The co-integration between spot price and future spot prices is the indication of efficiency and developed nature of the market. The Granger Causality Test results on the direction of flow of information between the spot and futures market shows that in majority (9 out of 15) of the commodities there were bi-directional flow of information. This shows that due to information flow from both sides, spot to future markets and future market to spot market, both were equally responsible for the price discovery process. The unidirectional causal relationship exhibited in six (6) commodities showed that futures market is leading the spot market. Whereas in terms of volatility, the GARCH test results show that there is volatility clustering and persistence throughout the study period. Even the Granger causality test on volatility revealed that the causation of volatility was bi-directional in 10 commodities. To be specific, we show that Indian agricultural commodities markets are highly efficient during the study period, including the period of price spikes and price distortions. The results of this study, stated above, shows that Indian agricultural commodity futures trading is highly efficient and playing the role it is supposed to play pretty good. The conclusions would certainly serve the concerned policy makers in decision making. Let us expect that the scenario of suspension and ban on futures trading in agricultural commodities is not repeated again, in the interest of Indian farmers. In-spite-of the above positive indications of the efficiency of Indian agriculture commodity market, it has witnessed massive and prolonged price escalations since 2007. The price spikes may be attributed to other fundamental factors not related to the scope of a futures exchange and call for further research.
{"title":"The Relative Efficiency and Volatility of Indian Agricultural Commodity Futures Markets","authors":"Velmurugan Palaniappan Shanmugam, P. Armah","doi":"10.2139/ssrn.2975298","DOIUrl":"https://doi.org/10.2139/ssrn.2975298","url":null,"abstract":"Indian agricultural commodity futures market is in the nascent stage. Since lifting of ban on futures trading in the beginning of this millennium, it is still facing serious threat from learned and the lay. Like any other futures market, Indian agricultural commodity futures markets are also expected to perform the role of price discovery and risk management. After having outlined the present status of Indian agricultural commodities market, a comprehensive study on the interrelationship between the spot and futures prices of 15 agricultural commodities is carried out to understand the dynamics of the co-integration, price causality and volatility factors which determine the efficiency of those markets for the period which stand different by various economical and market conditions, for arriving at relative conclusions. The Johansen’s co-integration test on the spot and futures data of the 15 agricultural commodities has shown that the spot and futures market were co-integrated). This proved that the market was efficient and the agriculture commodity futures exchanges provided efficient hedge against price risk emerging in respective commodities. The co-integration between spot price and future spot prices is the indication of efficiency and developed nature of the market. The Granger Causality Test results on the direction of flow of information between the spot and futures market shows that in majority (9 out of 15) of the commodities there were bi-directional flow of information. This shows that due to information flow from both sides, spot to future markets and future market to spot market, both were equally responsible for the price discovery process. The unidirectional causal relationship exhibited in six (6) commodities showed that futures market is leading the spot market. Whereas in terms of volatility, the GARCH test results show that there is volatility clustering and persistence throughout the study period. Even the Granger causality test on volatility revealed that the causation of volatility was bi-directional in 10 commodities. To be specific, we show that Indian agricultural commodities markets are highly efficient during the study period, including the period of price spikes and price distortions. \u0000The results of this study, stated above, shows that Indian agricultural commodity futures trading is highly efficient and playing the role it is supposed to play pretty good. The conclusions would certainly serve the concerned policy makers in decision making. Let us expect that the scenario of suspension and ban on futures trading in agricultural commodities is not repeated again, in the interest of Indian farmers. In-spite-of the above positive indications of the efficiency of Indian agriculture commodity market, it has witnessed massive and prolonged price escalations since 2007. The price spikes may be attributed to other fundamental factors not related to the scope of a futures exchange and call for further research.","PeriodicalId":306457,"journal":{"name":"ERN: Futures (Topic)","volume":"161 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-05-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134381722","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
An analytical expression for bivariate normal distribution function is obtained. The bivariate normal integrand is expressed as exponential expansion and the integration is analytically expressed by recurrence formulas. The desired accuracy can be reached by taking the number of expansions. The analytical approximation results from finite expansions.
{"title":"An Analytical Expression for Bivariate Normal Distribution","authors":"Kelin Pan","doi":"10.2139/ssrn.2924071","DOIUrl":"https://doi.org/10.2139/ssrn.2924071","url":null,"abstract":"An analytical expression for bivariate normal distribution function is obtained. The bivariate normal integrand is expressed as exponential expansion and the integration is analytically expressed by recurrence formulas. The desired accuracy can be reached by taking the number of expansions. The analytical approximation results from finite expansions.","PeriodicalId":306457,"journal":{"name":"ERN: Futures (Topic)","volume":"20 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-02-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127541086","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
A number of studies have found nearby futures prices in the Nordic power market to be biased forecasts, overshooting subsequent spot prices. This could be due to a persistent risk premium in a market dominated by long hedgers. However, in several studies the size of the bias has been taken as evidence of the market being immature and inefficient. In this paper, we present the results from an updated study of the forecasting performance of Nordic power futures. Using observations from October 2003 through January 2015, we estimate the standard models as well as a set of models in which we allow for seasonal variations and possible shifts in the risk premium, given structural changes in the market. Further, we report the results from simulated investments in which we persistently short nearby futures and maintain this position through expiration. We find that, after 2008, Nordic short-term power futures became unbiased and more precise forecasts. Consequently, we conclude that the Nordic futures market for power might have matured and now appears to be at least weak-form efficient. We suggest that the physical integration of the Nordic and Dutch markets through the opening of the NorNed cable in 2008 may have been a factor that contributed to this development.
{"title":"The Nordic Futures Market for Power: Finally Mature and Efficient?","authors":"Erik Smith-Meyer, O. Gjølberg","doi":"10.21314/JEM.2016.151","DOIUrl":"https://doi.org/10.21314/JEM.2016.151","url":null,"abstract":"A number of studies have found nearby futures prices in the Nordic power market to be biased forecasts, overshooting subsequent spot prices. This could be due to a persistent risk premium in a market dominated by long hedgers. However, in several studies the size of the bias has been taken as evidence of the market being immature and inefficient. In this paper, we present the results from an updated study of the forecasting performance of Nordic power futures. Using observations from October 2003 through January 2015, we estimate the standard models as well as a set of models in which we allow for seasonal variations and possible shifts in the risk premium, given structural changes in the market. Further, we report the results from simulated investments in which we persistently short nearby futures and maintain this position through expiration. We find that, after 2008, Nordic short-term power futures became unbiased and more precise forecasts. Consequently, we conclude that the Nordic futures market for power might have matured and now appears to be at least weak-form efficient. We suggest that the physical integration of the Nordic and Dutch markets through the opening of the NorNed cable in 2008 may have been a factor that contributed to this development.","PeriodicalId":306457,"journal":{"name":"ERN: Futures (Topic)","volume":"46 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2016-10-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128381226","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2016-08-25DOI: 10.16980/JITC.12.4.201608.223
P. Maghirang
The study evaluated other countries’ index futures in managing risk of PSEi by using 486 daily closing prices from, May 15, 2013 to October 8, 2015. Cross-hedging ratios and cross-hedging performance of S&P500 and NIKKEI225 futures were estimated with the use of the OLS regression, VECM and the GARCH models. The cross-hedging effectiveness analysis was performed by in-sample and out-of-sample excluding data of 86 days. The results from unit root test showed that the time series of the first difference variables were stationary. The long-run relationship between PSEi and the three index futures was established by applying the Johansen co-integration model. The computed hedge ratios and cross-hedging effectiveness were almost similar for OLS and GARCH method. Among the two index futures, S&P500 futures has better cross-hedging effectiveness with PSEi than NIKKEI225 futures. But overall, the two futures used was not as effective in minimizing risk of PSEi as compared to direct hedging. Hence, it is necessary to look for other possible risk management tool (i.e. other countries’ index futures/foreign exchange futures) to be cross-hedged with PSEi that will produce a better hedging effectiveness.
{"title":"Cross Hedging Effectiveness of S&P500 and NIKKEI225 Futures to the Philippine Stock Exchange Composite Index","authors":"P. Maghirang","doi":"10.16980/JITC.12.4.201608.223","DOIUrl":"https://doi.org/10.16980/JITC.12.4.201608.223","url":null,"abstract":"The study evaluated other countries’ index futures in managing risk of PSEi by using 486 daily closing prices from, May 15, 2013 to October 8, 2015. Cross-hedging ratios and cross-hedging performance of S&P500 and NIKKEI225 futures were estimated with the use of the OLS regression, VECM and the GARCH models. The cross-hedging effectiveness analysis was performed by in-sample and out-of-sample excluding data of 86 days. The results from unit root test showed that the time series of the first difference variables were stationary. The long-run relationship between PSEi and the three index futures was established by applying the Johansen co-integration model. The computed hedge ratios and cross-hedging effectiveness were almost similar for OLS and GARCH method. Among the two index futures, S&P500 futures has better cross-hedging effectiveness with PSEi than NIKKEI225 futures. But overall, the two futures used was not as effective in minimizing risk of PSEi as compared to direct hedging. Hence, it is necessary to look for other possible risk management tool (i.e. other countries’ index futures/foreign exchange futures) to be cross-hedged with PSEi that will produce a better hedging effectiveness.","PeriodicalId":306457,"journal":{"name":"ERN: Futures (Topic)","volume":"52 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2016-08-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132580289","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper studies the optimal VIX futures trading problems under a regime-switching model. We consider the VIX as mean reversion dynamics with dependence on the regime that switches among a finite number of states. For the trading strategies, we analyze the timings and sequences of the investor’s market participation, which leads to several corresponding coupled system of variational inequalities. The numerical approach is developed to solve these optimal double stopping problems by using projected-successive-over-relaxation (PSOR) method with Crank–Nicolson scheme. We illustrate the optimal boundaries via numerical examples of two-state Markov chain model. In particular, we examine the impacts of transaction costs and regime-switching timings on the VIX futures trading strategies.
{"title":"Trading VIX Futures Under Mean Reversion with Regime Switching","authors":"Jiao Li","doi":"10.2139/ssrn.2784215","DOIUrl":"https://doi.org/10.2139/ssrn.2784215","url":null,"abstract":"This paper studies the optimal VIX futures trading problems under a regime-switching model. We consider the VIX as mean reversion dynamics with dependence on the regime that switches among a finite number of states. For the trading strategies, we analyze the timings and sequences of the investor’s market participation, which leads to several corresponding coupled system of variational inequalities. The numerical approach is developed to solve these optimal double stopping problems by using projected-successive-over-relaxation (PSOR) method with Crank–Nicolson scheme. We illustrate the optimal boundaries via numerical examples of two-state Markov chain model. In particular, we examine the impacts of transaction costs and regime-switching timings on the VIX futures trading strategies.","PeriodicalId":306457,"journal":{"name":"ERN: Futures (Topic)","volume":"90 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2016-05-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125479004","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Our first aim in this paper is to introduce a futures-based model able of capturing the main features displayed by Crude Oil futures and options contracts, such as the Samuelson volatility effect and the volatility smile. We calculate the joint characteristic function of two futures contracts in the model in analytic form and use it to price calendar spread options. In an empirical application we show that the model, in contrast to simpler nested models, can be successfully calibrated to market prices of vanilla and calendar spread options. Our second aim is to use this model to analyze the dependence structure of Crude Oil futures contracts. To this end, we propose analytical expressions giving the copula and copula density directly in terms of the joint characteristic function. These tools allow us to perform an in-depth analysis for pairs of futures, and we observe a phenomenon we call the Samuelson correlation effect.
{"title":"From the Samuelson Volatility Effect to a Samuelson Correlation Effect: An Analysis of Crude Oil Calendar Spread Options","authors":"Lorenz Schneider, B. Tavin","doi":"10.2139/ssrn.2501931","DOIUrl":"https://doi.org/10.2139/ssrn.2501931","url":null,"abstract":"Our first aim in this paper is to introduce a futures-based model able of capturing the main features displayed by Crude Oil futures and options contracts, such as the Samuelson volatility effect and the volatility smile. We calculate the joint characteristic function of two futures contracts in the model in analytic form and use it to price calendar spread options. In an empirical application we show that the model, in contrast to simpler nested models, can be successfully calibrated to market prices of vanilla and calendar spread options. Our second aim is to use this model to analyze the dependence structure of Crude Oil futures contracts. To this end, we propose analytical expressions giving the copula and copula density directly in terms of the joint characteristic function. These tools allow us to perform an in-depth analysis for pairs of futures, and we observe a phenomenon we call the Samuelson correlation effect.","PeriodicalId":306457,"journal":{"name":"ERN: Futures (Topic)","volume":"13 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2016-03-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127746362","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Benjamin Cheng, Christina Sklibosios Nikitopoulos, E. Schlögl
Aiming to study pricing of long-dated commodity derivatives, this paper presents a class of models within the Heath, Jarrow, and Morton (1992) framework for commodity futures prices that incorporates stochastic volatility and stochastic interest rate and allows a correlation structure between the futures price process, the futures volatility process and the interest rate process. The functional form of the futures price volatility is specified so that the model admits finite dimensional realisations and retains affine representations, henceforth quasi-analytical European futures option pricing formulae can be obtained. A sensitivity analysis reveals that the correlation between the interest rate process and the futures price process has noticeable impact on the prices of long-dated futures options, while the correlation between the interest rate process and the futures price volatility process does not impact option prices. Furthermore, when interest rates are negatively correlated with futures prices then option prices are more sensitive to the volatility of interest rates, an effect that is more pronounced with longer maturity options.
为了研究长期商品衍生品的定价，本文提出了Heath, Jarrow, and Morton(1992)框架下的一类商品期货价格模型，该模型包含随机波动率和随机利率，并允许期货价格过程、期货波动率过程和利率过程之间的关联结构。指定期货价格波动的函数形式，使模型允许有限维度实现并保留仿射表示，因此可以得到准解析欧式期货期权定价公式。敏感度分析表明，利率过程与期货价格过程的相关性对长期期货期权价格有显著影响，而利率过程与期货价格波动过程的相关性对期权价格没有影响。此外，当利率与期货价格呈负相关时，期权价格对利率的波动更为敏感，这种影响在期限较长的期权中更为明显。
{"title":"Pricing of Long-Dated Commodity Derivatives with Stochastic Volatility and Stochastic Interest Rates","authors":"Benjamin Cheng, Christina Sklibosios Nikitopoulos, E. Schlögl","doi":"10.2139/ssrn.2712025","DOIUrl":"https://doi.org/10.2139/ssrn.2712025","url":null,"abstract":"Aiming to study pricing of long-dated commodity derivatives, this paper presents a class of models within the Heath, Jarrow, and Morton (1992) framework for commodity futures prices that incorporates stochastic volatility and stochastic interest rate and allows a correlation structure between the futures price process, the futures volatility process and the interest rate process. The functional form of the futures price volatility is specified so that the model admits finite dimensional realisations and retains affine representations, henceforth quasi-analytical European futures option pricing formulae can be obtained. A sensitivity analysis reveals that the correlation between the interest rate process and the futures price process has noticeable impact on the prices of long-dated futures options, while the correlation between the interest rate process and the futures price volatility process does not impact option prices. Furthermore, when interest rates are negatively correlated with futures prices then option prices are more sensitive to the volatility of interest rates, an effect that is more pronounced with longer maturity options.","PeriodicalId":306457,"journal":{"name":"ERN: Futures (Topic)","volume":"36 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2016-01-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129399106","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2015-04-02DOI: 10.15194/JOFI_2015.V1.I1.1
D. Santos, E. C. Lucas, Vinicius Brunassi Silva, Bruno Nunes Medeiro
Portuguese Abstract: Objetivo. O objetivo deste artigo e aferir causalidade entre a acao preferencial da Petrobras (PETR4) com o mercado futuro de commodities de petroleo (contratos com primeiro vencimento CL1) e o indice futuro do S&P 500 (contratos com primeiro vencimento, SP1). Metodologia. Utilizamos o vetor auto-regressivo (VAR) e o vetor de correcao de erros (VEC) para descrever a estrutura de interdependencia entre as variaveis. Achados. Os testes de causalidade indicaram que a commodity de petroleo e o indice de acoes norte-americano Granger causam PETR4. Verificamos que um modelo VAR(1) e o mais adequado para capturar o efeito cruzado entre as variaveis. Por fim, os testes indicaram que o modelo do tipo VEC melhora as previsoes para as variaveis PETR4 e CL1. Limitacoes. Apesar de utilizar um grande volume de informacoes intradiarias, os dados referem-se a apenas seis meses de observacoes, o que pode viesar os resultados obtidos. Originalidade/Valor. O estudo e pioneiro (ao menos no conhecimento dos autores) em averiguar relacoes entre esses ativos. English Abstract: Objective. This paper aims to assess causality between the Petrobras’ stocks (PETR4) with the future market for oil (CL1) and the S&P 500 futures. Methodology. We use the vector autoregression (VAR) and vector error correction (VEC) for describing the structure of interdependence between variables. Findings. The causality tests indicated that the commodity oil and the North American stock index Granger cause PETR4. We found that a VAR(1) model is the most appropriate to capture the cross effect between variables. Finally, the tests indicated that the model of type VEC improves predictions for PETR4 and CL1 variables. Limitations. Despite using a large volume of intraday information, data refer to only six months of observations, which can bias the results. Originality/Value. Under the authors’ knowledge, this is a pioneering study about relationships between these assets.
{"title":"Influência Intradiária Do Preço Internacional Do Petróleo Nas Ações Da Petrobrás (Influence of Intraday International Oil Price in Petrobras’ Stocks)","authors":"D. Santos, E. C. Lucas, Vinicius Brunassi Silva, Bruno Nunes Medeiro","doi":"10.15194/JOFI_2015.V1.I1.1","DOIUrl":"https://doi.org/10.15194/JOFI_2015.V1.I1.1","url":null,"abstract":"Portuguese Abstract: Objetivo. O objetivo deste artigo e aferir causalidade entre a acao preferencial da Petrobras (PETR4) com o mercado futuro de commodities de petroleo (contratos com primeiro vencimento CL1) e o indice futuro do S&P 500 (contratos com primeiro vencimento, SP1). Metodologia. Utilizamos o vetor auto-regressivo (VAR) e o vetor de correcao de erros (VEC) para descrever a estrutura de interdependencia entre as variaveis. Achados. Os testes de causalidade indicaram que a commodity de petroleo e o indice de acoes norte-americano Granger causam PETR4. Verificamos que um modelo VAR(1) e o mais adequado para capturar o efeito cruzado entre as variaveis. Por fim, os testes indicaram que o modelo do tipo VEC melhora as previsoes para as variaveis PETR4 e CL1. Limitacoes. Apesar de utilizar um grande volume de informacoes intradiarias, os dados referem-se a apenas seis meses de observacoes, o que pode viesar os resultados obtidos. Originalidade/Valor. O estudo e pioneiro (ao menos no conhecimento dos autores) em averiguar relacoes entre esses ativos. English Abstract: Objective. This paper aims to assess causality between the Petrobras’ stocks (PETR4) with the future market for oil (CL1) and the S&P 500 futures. Methodology. We use the vector autoregression (VAR) and vector error correction (VEC) for describing the structure of interdependence between variables. Findings. The causality tests indicated that the commodity oil and the North American stock index Granger cause PETR4. We found that a VAR(1) model is the most appropriate to capture the cross effect between variables. Finally, the tests indicated that the model of type VEC improves predictions for PETR4 and CL1 variables. Limitations. Despite using a large volume of intraday information, data refer to only six months of observations, which can bias the results. Originality/Value. Under the authors’ knowledge, this is a pioneering study about relationships between these assets.","PeriodicalId":306457,"journal":{"name":"ERN: Futures (Topic)","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-04-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134090078","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Jaehun Choi, Hosung Lim, Rogelio V. Mercado, Cyn‐Young Park
This paper examines the impact of foreign participation in Korean Treasury Bond (KTB) futures and its role in price discovery for KTBs, using daily transactions data from the over-the-counter market for KTBs and from the Korea Exchange for the futures. Our analysis suggests that foreign trading in the KTB futures market leads the price discovery process for the underlying bonds. Empirical results show that foreigners’ daily net long positions in the futures market exert significant influence in KTB and KTB futures prices. We also find that it is the unexpected component of foreign investors’ net long futures positions that explains a significant share of the pricing effects, suggesting that how foreign trading responds to news carries additional information content.
{"title":"Price Discovery and Foreign Participation in Korea's Government Bond Cash and Futures Markets","authors":"Jaehun Choi, Hosung Lim, Rogelio V. Mercado, Cyn‐Young Park","doi":"10.2139/ssrn.2580691","DOIUrl":"https://doi.org/10.2139/ssrn.2580691","url":null,"abstract":"This paper examines the impact of foreign participation in Korean Treasury Bond (KTB) futures and its role in price discovery for KTBs, using daily transactions data from the over-the-counter market for KTBs and from the Korea Exchange for the futures. Our analysis suggests that foreign trading in the KTB futures market leads the price discovery process for the underlying bonds. Empirical results show that foreigners’ daily net long positions in the futures market exert significant influence in KTB and KTB futures prices. We also find that it is the unexpected component of foreign investors’ net long futures positions that explains a significant share of the pricing effects, suggesting that how foreign trading responds to news carries additional information content.","PeriodicalId":306457,"journal":{"name":"ERN: Futures (Topic)","volume":"7 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-03-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134286340","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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