scholarly journals Asymmetric Volatility Relevance in Risk Management: An Empirical Analysis using Stock Index Futures

2021 ◽  
Vol 16 (TNEA) ◽  
pp. 1-18
Author(s):  
Guillermo Benavides
Keyword(s):  
Risk Management ◽  
Empirical Analysis ◽  
Value At Risk ◽  
Stock Exchange ◽  
Research Work ◽  
Stock Index ◽  
Futures Contracts ◽  
Stock Index Futures ◽  
Index Futures ◽  
Minimum Capital

The objective of this research work is to show the relevance of asymmetries in estimating volatility. The methodology consists in the application of ARCH-type models and implied volatilities of options (IV) to estimate Value-at-Risk (VaR). These for a portfolio of stock index futures for various time horizons. The empirical analysis is carried out for the futures contracts for the Standard and Poors 500 and Mexican Stock Exchange Indices. According to the results, the IV model is superior in terms of precision compared to the ARCH-type models. It is recommended to use the relevant statistical gains when asymmetries are included with respect to when asymmetries are not used. The referred gains range from 4 to 150 basis points of minimum capital risk requirements. The originality of the present work consists of showing the importance of considering the asymmetric effects with IV and ARCH-type models in volatility forecasts within risk management analysis. It is concluded that the methodology means gains in monetary terms.

scholarly journals Asymmetric Volatility Effects in Risk Management: An Empirical Analysis using a Stock Index Futures

2020 ◽  
Author(s):  
Guillermo Benavides
Keyword(s):  
Risk Management ◽  
Empirical Analysis ◽  
Value At Risk ◽  
Stock Exchange ◽  
Stock Index ◽  
Futures Contracts ◽  
Stock Index Futures ◽  
Index Futures ◽  
Minimum Capital ◽  
The Empirical Analysis

In this research paper ARCH-type models and option implied volatilities (IV) are applied in order to estimate the Value-at-Risk (VaR) of a stock index futures portfolio for several time horizons. The relevance of the asymmetries in the estimated volatility estimation is considered. The empirical analysis is performed on futures contracts of both the Standard and Poors 500 Index and the Mexican Stock Exchange. According to the results, the IV model is superior in terms of precision compared to the ARCH-type models. Under both methodologies there are relevant statistical gains when asymmetries are included. The referred gains range from 4 to around 150 basis points of minimum capital risk requirements. This research documents the importance of taking asymmetric effects (leverage effects) into account in volatility forecasts when it comes to risk management analysis.

Cross-Market Linkages of Taiwan Index Futures Contracts Listed on the Taiwan Futures Exchange and the Singapore Exchange

2007 ◽  
Vol 10 (04) ◽  
pp. 561-583 ◽  
Author(s):  
Hung-Gay Fung ◽  
Qingfeng "Wilson" Liu ◽  
Gyoungsin "Daniel" Park
Keyword(s):  
Stock Exchange ◽  
Trading Strategies ◽  
Stock Index ◽  
Futures Contracts ◽  
Stock Index Futures ◽  
Index Futures ◽  
Taiwan Stock Exchange ◽  
Market Linkages ◽  
Cointegration Tests ◽  
Causality Tests

Cointegration tests and ex ante trading rules are applied to study cross-market linkages between the Taiwan Index futures contracts listed on the Singapore Exchange and the Taiwan Stock Exchange Capitalization-weighted Stock Index futures contracts listed on the Taiwan Futures Exchange. The exchange rate-adjusted returns of the two futures series do not differ significantly in mean but in variances, and show significant mean-reverting tendencies between them. Our trading strategies are able to generate statistically significant, if economically insignificant, profits, while our Granger causality tests demonstrate that information flows primarily from the Singapore market to the Taiwan market, a result confirming other research.

Futures and Forward Prices - Theory and Hungarian Experience

2004 ◽  
Vol 54 (2) ◽  
pp. 159-174
Author(s):  
M. Radnai
Keyword(s):  
Stock Exchange ◽  
Relative Difference ◽  
Stock Index ◽  
Futures Contracts ◽  
Stock Index Futures ◽  
Futures Prices ◽  
Index Futures ◽  
Forward Prices ◽  
The Difference ◽  
Hungarian Experience

Researchers have examined the difference between forward and futures prices since the introduction of futures contracts. In this paper we derive the explicit formula for stock-index futures prices under the assumptions of lognormal asset prices, determine the relative difference between futures and forward prices, and test the model for BUX contracts traded on the Budapest Stock Exchange between 1997 and 2002.

Analysis of the Association for Shanghai Composite Index and Stock Index Futures

2014 ◽  
Vol 644-650 ◽  
pp. 5672-5675
Author(s):  
Rui Zhong Wang
Keyword(s):  
Positive Relationship ◽  
Equal Opportunity ◽  
Stock Exchange ◽  
Composite Index ◽  
Securities Market ◽  
Stock Index ◽  
Futures Contracts ◽  
Stock Index Futures ◽  
Index Futures ◽  
Stock Traders

In this paper, data mining association rules algorithms and techniques for relevance Shanghai CSI 300 Shanghai Financial Futures Exchange and the Shanghai Stock Index Futures Stock Exchange Composite Index were analyzed. The results show that the futures contracts and price movements highly positive correlation exists. The author believes that between the two since it is highly positive relationship, IF way of trading and settlement transactions should be fully consistent with the way the Shanghai Stock Exchange and deliver company's stock. Thus, equal opportunity traders in futures contracts and stock traders, more conducive to the development of China's securities market.

Stock index futures contracts and separability of returns

1984 ◽  
Vol 4 (1) ◽  
pp. 87-102 ◽  
Author(s):  
Anthony F. Herbst ◽  
Nicholas O. Ordway
Keyword(s):  
Stock Index ◽  
Futures Contracts ◽  
Stock Index Futures ◽  
Index Futures

scholarly journals Hedging Long-Term Exposures of a Well-Diversified Portfolio with Short-Term Stock Index Futures Contracts

2014 ◽  
Vol 2014 ◽  
pp. 1-13 ◽  
Author(s):  
Yufang Liu ◽  
Wei-Guo Zhang ◽  
Rongda Chen ◽  
Junhui Fu
Keyword(s):  
Optimal Solution ◽  
Optimal Number ◽  
Stock Index ◽  
Futures Contracts ◽  
Equivalent Transformation ◽  
Stock Index Futures ◽  
Index Futures ◽  
Proposed Model ◽  
Diversified Portfolio

It is difficult for passive portfolio strategy to manage the long-term exposure of a well-diversified portfolio because stock index futures contracts have a finite life limited by their maturity. In this paper, we investigate the problem of the rollover hedge strategy for the long-term exposure of a well-diversified portfolio. First, we consider the rollover hedge strategy for the well-diversified portfolio when the portfolio is not adjusted during the period. In order to obtain the optimal solution of the proposed model, the auxiliary models are constructed using the equivalent transformation technique. Moreover, dynamic programming is employed to derive the optimal positions of stock index futures contracts for the long-term exposure of the well-diversified portfolio. In addition, we extend the result to the case of the rollover hedge strategy with transaction costs and derive the optimal number of stock index futures contracts.

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