Common deviation and regime-dependent dynamics in the index derivatives markets

Cited 21 time in webofscience Cited 0 time in scopus
  • Hit : 612
  • Download : 0
We analyze high-quality intraday data for KOSPI 200 futures and options to examine a common deviation and regime-dependent price dynamics in the index derivatives markets according to reliability of the common deviation. We find common deviation in the futures and options markets. In terms of the dynamics of asset prices and trading volumes, the linkage between the derivatives (i.e., futures and options) markets is stronger than the relationship between the underlying stock market and the derivatives markets. Whereas the deviations between the derivatives markets and the stock market exhibit an inverted U-shaped intraday pattern, the pattern of the deviation between futures and options markets is relatively flat. The deviations between the derivatives markets and the stock market are tied to trading activities in the same direction. When we identify regimes based on the difference between deviations in derivatives markets, defined as the relative deviation, the common deviation is significantly corrected only when the relative deviation is moderate. Although the stock market does not lead the derivatives markets when the relative deviation is mild, there is a bi-directional information flow between the derivatives markets and the stock market with extreme relative deviation. The result is still consistent in subsample analysis, though we find the informational effect of stocks becomes faint over time. A sudden change in the relative deviation is induced by options trading rather than futures trading.
Publisher
ELSEVIER SCIENCE BV
Issue Date
2015-06
Language
English
Article Type
Article
Keywords

PUT-CALL PARITY; ORDER-SPLITTING STRATEGY; P 500 INDEX; STOCK INDEX; PRICE DISCOVERY; OPTION MARKETS; FUTURES MARKET; INFORMATION-CONTENT; ERROR-CORRECTION; HONG-KONG

Citation

PACIFIC-BASIN FINANCE JOURNAL, v.33, pp.1 - 22

ISSN
0927-538X
DOI
10.1016/j.pacfin.2015.02.001
URI
http://hdl.handle.net/10203/200098
Appears in Collection
MT-Journal Papers(저널논문)
Files in This Item
There are no files associated with this item.
This item is cited by other documents in WoS
⊙ Detail Information in WoSⓡ Click to see webofscience_button
⊙ Cited 21 items in WoS Click to see citing articles in records_button

qr_code

  • mendeley

    citeulike


rss_1.0 rss_2.0 atom_1.0