FUTURE TRADING ACTIVITY AND COMMODITY CASH PRICE VOLATILITY: EVIDENCE FROM INDIA Sanjay Sehgal Professor of Finance Department of Financial Studies University.

Slides:

Advertisements

Similar presentations

11 Financial Derivatives Currency Future i.It is a Financial Contract to Buy or Sell the underlying Currency, the price of which (Currency Future)

Advertisements

Chapter Outline Hedging and Price Volatility Managing Financial Risk

Financial Market Integration in Euro Area Development and Obstacles Zhang Jikang and Miss. Wang Xinhui Center for European Studies, Fudan University April.

Merchanting and other trade- related services SNA Chapter 14 (external transactions)

The State Trading Corporation was created by an Act of Parliament in 1982 State Trading Corporation NOT AN OFFICIAL UNCTAD RECORD.

Futures markets. Forward - an agreement calling for a future delivery of an asset at an agreed-upon price Futures - similar to forward but feature formalized.

Futures trading and market microstructure of the underlying security: A high frequency experiment at the single stock futures level Kate Phylaktis and.

POLITICAL ECONOMY OF INTERNATIONAL OIL Trade Structure and Growth SAMUEL A SARKODIE In Daniel Lederman and William F. Maloney’s Natural Resources:

FACTORS AFFECTING FORWARD PRICING DECISIONS: EVIDENCE FROM INDIAN POULTRY SECTOR Research Concept Note D. Bardhan Asstt. Professor (Vety. Economics) Department.

ECON 337: Agricultural Marketing Chad Hart Associate Professor Lee Schulz Assistant Professor

McGraw-Hill/Irwin © 2008 The McGraw-Hill Companies, Inc., All Rights Reserved. Futures Markets and Risk Management CHAPTER 17.

Growth in Indian Commodities Market Mr Narendra Gupta, CBO, NCDEX August 10, 2005.

Commodity Market Outlook WBFI Annual Meeting T. Randall Fortenbery Professor School of Economic Sciences Washington State University.

Introduction to Futures Markets. APEC 5010 Additional Resources Definition of Marketing Terms fact sheet Introduction to Futures Markets fact sheet.

Finance 300 Financial Markets Lecture 23 © Professor J. Petry, Fall 2002

Impact of the introduction of the risk management products Dr. San-Lin Chung Department of Finance National Taiwan University.

Instruments of Financial Markets at Studienzentrum Genrzensee Switzerland. August 30-September 17, 2004 Course attended by: Muhammad Arif Senior Joint.

Passive Investors and Managed Money in Commodity Futures Part 3: Volatility Prepared for: The CME Group Prepared by: October, 2008.

McGraw-Hill/Irwin © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved. Futures Markets CHAPTER 16.

An Enquiry into Efficiency of Futures Trading in Agricultural Commodities in India Ashwini Kumar, IES Ministry of Agriculture.

HCT Drivers of Volumes Drivers of Volumes. HCT Outline of the Presentation Factors leading to higher volumes in certain commodities Factors leading to.

PERFORMANCE ASSESSMENT OF AGRICULTURAL FUTURES MARKETS IN INDIA JATINDER BIR SINGH NCDEX Institute of Commodity Markets and Research (NICR )

Food Security in India: Does the futures market for wheat meet the bill? Prof. K.V. Bhanu Murthy Department of Commerce, Delhi School of Economics, University.

This presentation is for information only and shall not be used as the basis for trading or any other purpose. DCE has taken reasonable care to ensure.

1 The availability, timeliness and quality of rapid estimates UNCTAD experience Henri Laurencin INTERNATIONAL SEMINAR ON TIMELINESS, METHODOLOGY AND COMPARABILITY.

Hedging Effectiveness with Physical Delivery and Cash Settlement at Indian Commodity Futures Market: An Empirical Comparison Analysis Prasanna Kumar Barik.

Finance 300 Financial Markets Lecture 11 Professor J. Petry, Fall, 2002©

Copyright© JSE Limited The Role of Commodities Markets in Wealth Creation in Africa Africa – An Investment Destination Conference September.

Financial Derivatives market of Brazil. OUTLINE – Derivative market in Brazil – Derivative users in Brazil – Factors Contributing to the growth of derivatives.

Impact of Macro Indicators on Short Selling: Evidence from Tokyo Stock Exchange.

CURRENT SCENARIO OF EQUITY MARKET IN INDIA SIZE/STATISTICS MAJOR PLAYERS FACTORS DRIVING EQUITY MARKET IMPACT OF FII/FDI.

Indira Gandhi National Open University (IGNOU)

National Treasury, Republic of South Africa 1 SECURITY SERVICES BILL, 2004 PRESENTATION TO THE PORTFOLIO COMMITTEE ON FINANCE BY Samantha Anderson, Director.

Testing the Efficiency of Agriculture Commodities Market in India Prof Sanjay Sehgal Abhishek Singh.

Price Discovery in Futures and Spot Commodity Markets in India National Workshop on Commodity Research, 10th October, 2007, India International Centre,

Is Government Justified in Banning Futures Trade in Essential Commodities? Alka Parikh Department of Economics, University of Mumbai This paper has benefited.

Derivatives Usage in Risk Management by Non-Financial Firms: Evidence from Greece By Spyridon K. Kapitsinas PhD Center of Financial Studies, Department.

Introduction: Derivatives Options - a contract that gives buyer the right (not obligation) to purchase or sell something at a later time. Forward/Futures.

What challenges does commodity derivative market regulation need to consider? Myriam Vander Stichele SOMO 21 September 2010.

Financial Supervisory Commission 1 The Development in Taiwan Capital Market Fiona Su Deputy-Director Securities and Futures Bureau, FSC, Taiwan September.

Asymmetries in Forecasting Energy Product Prices APF Conference, Deutsche Bundesbank Frankfurt, Germany 2004 M. E. Malliaris Loyola University Chicago.

G-20 Conference on Commodity Price Volatility Istanbul, September 13, 2011 Commodity Price Booms, the Global Economy, and Low-income Countries Thomas Helbling.

LESSON 13 Futures Trading. In finance, a futures contract (more colloquially, futures) is a standardized forward contract which can be easily traded between.

Futures Markets and Risk Management

OTC Derivatives: Trading, Reporting & Regulations

Teaching futures markets with the “ZIP Code” trading game

40th IAEE International Conference

Prof. Njuguna Ndung’u, CBS Governor, Central Bank of Kenya

Investment Management

Understanding Agricultural Futures

Financial Derivatives

Ashutosh Verma C.V.R.S Vijay Kumar

Assessment of Penny Stocks

Forecasting Exchange Rates

Agricultural Marketing

Agricultural Marketing

Agricultural Marketing

Economics of International Finance Econ. 315

VOLATALITY AND FORECASTS OF COMMODITY EXCHANGE MARKET IN INDIA

ECON 511 International Finance & Open Macroeconomy CHAPTER ONE

Agricultural Marketing

Forecasting the daily dynamic hedge ratios in agricultural futures markets: evidence from the GARCH models Yuanyuan Zhang, School of Management, University.

Part III Exchange Rate Risk Management

INFLATION IN INDIA.

An Outline of the Proposed Study

Agricultural Marketing

Price Convergence in Agricultural Commodity Market

CME Bitcoin Futures: Volatility and Liquidity

NSAC Advanced Co-op Accounting Course

Price Discovery BY Dhanya K A.

Presentation transcript:

FUTURE TRADING ACTIVITY AND COMMODITY CASH PRICE VOLATILITY: EVIDENCE FROM INDIA Sanjay Sehgal Professor of Finance Department of Financial Studies University of Delhi South Campus Tel Dr. (Mrs.) Namita Rajput Reader in Commerce Sri Aurobindo College (M) University of Delhi

INTRODUCTION Organized commodity derivatives in India started in However, the introduction of futures resulted in speculation and more cash price volatility in the price levels (which was detrimental to the heath functioning of the underlying commodities), thereby resulting in a ban on the commodity futures in 1952.

As a result commodity derivative market remained dormant for about four decades until government, in a complete change in policy actively encouraged the commodity derivative market. Since 2002 the commodities future market in India has experienced an unprecedented boom in terms of the number of exchanges, number of commodities allowed for derivatives trading as well as the levels of futures trading in commodities

Futures trading in commodities has crossed the $ 1 Trillion mark in 2006 and the growth is so immense that if all goes well, trading account is likely to touch more than $ 5 Trillion mark in coming few years. At present, in India there are 3 national level electronic regional exchanges for trading commodity derivatives and, as many as 80 commodities are allowed for derivative trading.

OBJECTIVE OF THE STUDY To examine a lead-lag relationship between: futures trading activity (volume and open interest) and cash price volatility. cash price volatility and open interest for major agricultural commodities. To give a comprehensive picture on a debate over the stabilizing and destabilizing effects of future trading volume in India in relation to selected agricultural commodity future trading in India.

HYPOTHESIS Studies show, that the introduction of derivatives contracts improves liquidity and reduces informational asymmetries in the market. In this area, not much work is done in India. Hence, the present study will assess the impact of introducing index futures contracts on the cash price volatility of the underlying agricultural commodity index in India so as to fill the research gap in this area. The research will also study the stabilizing/ destabilizing effects of future trading volume in India.

The data will consist of daily cash closing prices, daily futures settlement prices, total futures trading volumes (TV), total futures open interest (OI), for selected agricultural commodities such as (wheat, rice oilseed). Cash and futures prices will be recorded and taken on daily basis. (Data* will be taken from mid-2002 to September 2007). *The data to be considered will be from Indian context.

METHODOLOGY USED Spot market volatility will be estimated using the GARCH model. Time series of spot market volatility as well as future market volatility and option market liquidity measures will be tested for stationarity. The association between spot market liquidity and future market volatility will be tested using a suitable causality test. Based on casualty result, we shall try to develop a predictive model.

THANK YOU