The aim of this article is to examine the presence of volatility transmission between futures index and underlying stock index by using intraday data in Turkey. We first examined the sudden changes in the variance of futures index return and the underlying spot index return. Then we employed the causality in the variance tests proposed by Hong (2001) and Hafner and Herwartz (2006). According to...

Simulations and games are widely accepted as a powerful mode of teaching and learning. This is especially so in the field of finance in teaching students the intricacies of stock market trading. Stock market simulations complement more traditional methods of teaching finance by encouraging learning by doing, by generating motivation and enjoyment, and by engaging the business student in a simul...

A large empirical literature has reported that the futures market contains valuable information for explaining stock returns and that stock returns display signi ̄cant cross-correlations internationally. A parallel literature has recorded evidence that the distribution of stock returns is close to a mixture of normal distributions and that Markov switching models may therefore provide an adequat...

We study the contemporaneous and intertemporal partial relation between T-bond pricing and changes in equity risk, as measured by the implied volatility from equity-index options. Our 1992 to 2007 sample is attractive because of the modest inflation risk and sizable time-series variability in equity risk. Over 1997 to 2007 and for inclusive one-half and one-quarter subperiods, we find that the ...

The prices of the option and futures of a stock both reflect the market’s expectation of futures changes of the stock’s price. Their prices normally align with each other within a limited window. When they do not, arbitrage opportunities arise: an investor who spots the misalignment will be able to buy (sell) options on one hand, and sell (buy) futures on the other and make risk-free profits. H...

This paper develops a dynamic, equilibrium model of a futures market to study optimal hedging and the term structure of open interest and futures prices. Investors continuously face spot price risk over time and attempt to hedge this risk using futures. Convenience yield shocks generate basis risk to rolling over near-to-maturity futures. Hence, investors need to simultaneously trade far-from-m...