Contemporaneous intra-day volume, option, and futures volatility transmissions across parallel markets

Chng, Michael and Gannon, Gerard 2003, Contemporaneous intra-day volume, option, and futures volatility transmissions across parallel markets, International review of financial analysis, vol. 12, no. 1, pp. 49-68.

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Title Contemporaneous intra-day volume, option, and futures volatility transmissions across parallel markets
Author(s) Chng, Michael
Gannon, Gerard
Journal name International review of financial analysis
Volume number 12
Issue number 1
Start page 49
End page 68
Publisher Elsevier Science Ltd
Place of publication New York, N.Y.
Publication date 2003
ISSN 1057-5219
1873-8079
Keyword(s) volatility transmission
simultaneous effects
out-of-sample forecast
Summary The primary objective of this article is to investigate volatility transmission across three parallel markets operating on the Sydney Futures Exchange (SFE), both within and out of sample. Half-hourly observations are sampled from transaction data for the share price index (SPI) futures, SPI futures options, and 90-day bank accepted bill (BAB) futures markets, and the analysis is carried out using the simultaneous volatility (SVL) system of equations as well as competing volatility models. The results confirm the poor ability of GARCH models to fit intraday data. This study also applies an artificial nesting procedure to evaluate the out-of-sample volatility forecasts. Implied volatility has very limited (if any) predictive power when evaluated in isolation, whereas the SVL model with implied volatility embedded provides incremental information relative to competing model forecasts.
Language eng
Field of Research 150201 Finance
HERDC Research category C1.1 Refereed article in a scholarly journal
Copyright notice ©2003, Elsevier Science Inc.
Persistent URL http://hdl.handle.net/10536/DRO/DU:30006610

Document type: Journal Article
Collection: School of Accounting, Economics and Finance
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