Ashutosh Verma C.V.R.S Vijay Kumar

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Presentation transcript:

Ashutosh Verma C.V.R.S Vijay Kumar An Examination of the Maturity Effect in the Indian Commodities Futures Market By Ashutosh Verma C.V.R.S Vijay Kumar Indian Institute of Forest Management, Bhopal

Maturity effect means variance of future price changes per unit of time increases as the time to maturity decreases. BCSS hypothesis states that maturity effect will be present in those contracts where the covariance between net carry cost and the spot price is negative.

Proposed study examines the Samuelson and BCSS hypotheses in the Indian agriculture commodities futures market Literature Review Extensive studies in the financial futures markets Studies on commodities futures market in developed countries.

Research Problems Do the Indian agriculture commodities futures markets have maturity effect. Does the negative covariance between the net carry cost and spot price explain the maturity effect

Data Logarithmic returns of the daily settlement prices of all the agriculture commodities futures contracts. Prices for the maturity month of the contract will not be considered. Volatility and net carry cost will be computed on daily basis. Each contract will be examined individually.

OLS Regressions will be performed for Daily volatility on time to maturity Daily volatility on time to maturity, calendar month and year on aggregated data Relationship will be analyzed for Net carry cost and spot price Maturity effect and covariance between net carry cost and spot price.