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Author: Qian Han Publisher: ISBN: Category : Languages : en Pages : 35
Book Description
Using a difference-in-difference approach, we find that restrictions placed on CSI 300 and CSI 500 index futures trading during the recent Chinese stock market crisis deteriorated spot market quality. This is more so for the September trade restriction. Our results can be explained by the sudden risk exposure faced by alpha-strategy traders. They stop trading spots after the index futures trading restrictions, hence worsening the spot market quality.
Author: Qian Han Publisher: ISBN: Category : Languages : en Pages : 35
Book Description
Using a difference-in-difference approach, we find that restrictions placed on CSI 300 and CSI 500 index futures trading during the recent Chinese stock market crisis deteriorated spot market quality. This is more so for the September trade restriction. Our results can be explained by the sudden risk exposure faced by alpha-strategy traders. They stop trading spots after the index futures trading restrictions, hence worsening the spot market quality.
Author: Jianqiang Hu Publisher: ISBN: Category : Languages : en Pages : 22
Book Description
Under the assumption of no arbitrage opportunity, the price of stock index futures should be equal to the spot price of the underlying stock index, excluding capital costs, dividends, and trading costs. However, since stock index futures have been introduced to the Chinese market in 2010, their prices have consistently diverged from their theoretical values in a very significant way. By using an analytical model, we try to provide some explanations as to why this may happen. Our model shows that the divergence of stock index futures prices from their theoretical values may be due to various trading and regulatory constraints, such as position limits and margin requirements, which play significant roles in Chinese markets. This is also consistent with the common belief that the more restrictive trading and regulatory constraints are, the less liquidity and efficient financial markets are, hence the more likely it is that asset prices would deviate from their true values. Our empirical results on two major Chinese market indices, CSI300 and SSE50, validate the results obtained from our analytical model.
Author: Ian Cooper Publisher: Forgotten Books ISBN: 9781330336588 Category : Business & Economics Languages : en Pages : 32
Book Description
Excerpt from Stock Index Futures: The Case for Markets in Baskets of Securities We provide an explanation for the explosive growth in the popularity of Stock Index Futures contracts. In our economy there are three broad classes of traders that place orders with a competitive market maker that sets a bid-ask spread arising from adverse selection. Informed traders trade on the basis of their private information about the value of particular securities. Liquidity traders trade either specific stocks, or wish to trade diversified portfolios. We show that the Stock Index is the efficient trading vehicle for this last class of traders, who abandon the spot securities markets with consequences for the liquidity of individual stocks. The reason is that the costs faced by diversified traders will be lower in the Index market than in markets for individual stocks, because any idiosyncratic information flowing in the Index market is substantially lower than that brought by insiders to the spot market. Stock Index Futures contracts are, therefore, convenient innovations for financial institutions that trade large portfolios of securities to match the liquidity needs of their clients. We predict that the innovation of index contracts adversely affects the liquidity of individual stocks. Trading in the stock market becomes more costly for those traders whose strategies involve the purchase or sale of specific securities. About the Publisher Forgotten Books publishes hundreds of thousands of rare and classic books. Find more at www.forgottenbooks.com This book is a reproduction of an important historical work. Forgotten Books uses state-of-the-art technology to digitally reconstruct the work, preserving the original format whilst repairing imperfections present in the aged copy. In rare cases, an imperfection in the original, such as a blemish or missing page, may be replicated in our edition. We do, however, repair the vast majority of imperfections successfully; any imperfections that remain are intentionally left to preserve the state of such historical works.
Author: George Karathanassis Publisher: ISBN: Category : Languages : en Pages : 21
Book Description
This paper investigates possible spill-over effects on the Spot Market due to the initiation of Futures contracts. According to many analysts there still exists a puzzle regarding the stabilization or destabilization effects of futures contracts. Although the speculative forces (uninformed investors) tend to destabilize the market, rational hedging strategies and the transition of risk allow for stabilization shift. In order to investigate this issue, many researchers during the last decade, have utilized the GARCH framework enriched to capture many stylized financial features, such as the asymmetric response to news and leptokurtosis. However, in this paper the GARCH framework is extended to allow for skewness in the return's distribution and to examine the timing of possible structural changes, while the conditional mean of the process is adjusted to account for time-varying risk premia and for the day of the week effects decomposition. Furthermore, the distinguishing feature of this paper is the SWARCH econometric model, which enables a dynamic regime shifting through a Markov Chain transition matrix. According to the empirical findings on the FTSE-20/ASE futures contract, there exists a significant stabilization effect on the long run, while in the short run this seems to be non-robust.
Author: Lijian Wei Publisher: ISBN: Category : Languages : en Pages : 29
Book Description
The aim of this paper is to find the optimal level of position limit for the Chinese Stock Index (CSI) 300 futures market. A small position limit helps to prevent price manipulations in the spot market, thus able to keep the magnitude of instantaneous price changes within policy makers' tolerance range. However, setting the position limit too small may also have negative effects on market quality. We propose an artificial limit order market with heterogeneous and interacting agents to examine the impact of different levels of position limit on market quality, which is measured by liquidity, return volatility, efficiency of information dissemination and trading welfare. The simulation model is based on realistic trading mechanism, investor structure and order submission behavior observed in the CSI 300 futures market. Our results show that based on the liquidity condition in September 2010, raising the position limit from 100 to 300 can significantly improve market quality and at the same time keep maximum absolute price change per 5 seconds under the 2% tolerance level. However, the improvement becomes only marginal when further increasing the position limit beyond 300. Therefore, we believe that raising the position limit a moderate level can enhance the functionality of the CSI 300 futures market, which benefits the development of the Chinese financial system.
Author: Charles M.S. Sutcliffe Publisher: Routledge ISBN: 1351148559 Category : Business & Economics Languages : en Pages : 534
Book Description
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.
Author: Qian Han
Author: Qian Han
Author: B. Thomas Byrne
Author: Jianqiang Hu
Author: Ebru Çaġlayan
Author: Ian Cooper
Author: George Karathanassis
Author: Lijian Wei
Author: United States. General Accounting Office
Author: Lawrence Harris
Author: Charles M.S. Sutcliffe