Effects of Price Limits on Returns and Volumes of Futures Contracts
Author | : 胡星陽 |
Publisher | : |
Total Pages | : |
Release | : 1996 |
Genre | : |
ISBN | : |
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Author | : 胡星陽 |
Publisher | : |
Total Pages | : |
Release | : 1996 |
Genre | : |
ISBN | : |
Author | : Gabriel Blair Fontinelle |
Publisher | : |
Total Pages | : |
Release | : 2020 |
Genre | : |
ISBN | : |
After October 1987, financial crisis, market regulators created dispositive called circuit breaks to contain high levels of volatility. As a type of circuit breaker, price limits were adopted not only on stock markets but in commodity futures contracts as well, however, its effects are not clear. The present study aimed to evaluate price limit ex-ante effects on the four major wheat futures markets by adopting Brogaard and Roshak (2015) methodology by estimating the probability of extreme movements and limit moves conditional to extreme movements and its ex-post effects on trading activity by contrasting the volume curve on limit days with a counterfactual volume curve that simulates a scenario where price limits were not hit. The results show that tighter limit levels decrease the probability of extreme movements by approximately 0.008% having an overall (four markets included) baseline probability of extreme moves equals 1.11% which agrees with the Holding Back hypothesis assuming extreme movements as a proxy for volatility. On the other hand, the probability of limit moves conditional to extreme movements increases when limit levels are tighter by approximately 0.066% with an overall baseline of 0.05% which supports the "Magnet" hypothesis. Regarding the ex-post effects, longer periods where prices stay at the limit level result in trading activity lost, however, if prices return to limit range but bounce back to a limit lock, the longer the gap between limit locks trading session experience an increase in trading activity. Moreover, the ex-post effects on trading activity are more intense in Chicago relative to Kansas City because Chicago presents a higher trading volume on average.
Author | : Joan Evans |
Publisher | : |
Total Pages | : 6 |
Release | : 2007 |
Genre | : |
ISBN | : |
Will trading volume shift from a market with price limits to a closely related market without them? An examination of the U.S. cotton market reveals that trading volume does in fact move from a class of security that is subject to trading limits (cotton futures) to another that is not (options on cotton futures). The results add to the debate on trading limits by calling into question the limits' overall effectiveness.
Author | : Franklin R. Edwards |
Publisher | : Springer Science & Business Media |
Total Pages | : 201 |
Release | : 2012-12-06 |
Genre | : Business & Economics |
ISBN | : 9400921934 |
Author | : Hendrik Bessembinder |
Publisher | : |
Total Pages | : 36 |
Release | : 1992 |
Genre | : Futures |
ISBN | : |
Author | : David Reiffen |
Publisher | : |
Total Pages | : 39 |
Release | : 2006 |
Genre | : |
ISBN | : |
We examine the effect of price limits on futures contracts where there exist options contracts on those futures that have no price limits. We establish that when options are trading, the futures price implied by put-call parity provides an accurate prediction of the unconstrained futures price. We also provide empirical evidence that futures trading volume decreases on limit hit days, and that some of this decline is effectively transferred to the options market. These facts suggest that price discovery shifts to the options market when limit hits occur on the futures market. We also document that the microstructure of the future's market on the next day is affected positively by the presence of options on limit days, as the presence of options lowers spreads and reduces intra-day price variability. In total, we find that options assist in price discovery in the presence of limits.
Author | : Laura Ellen Kodres |
Publisher | : |
Total Pages | : |
Release | : 1988 |
Genre | : |
ISBN | : |
Author | : Thomas A. Hieronymus |
Publisher | : |
Total Pages | : 358 |
Release | : 1972 |
Genre | : |
ISBN | : |
Author | : Ronald W. Anderson |
Publisher | : Free Press |
Total Pages | : 68 |
Release | : 1984 |
Genre | : Business & Economics |
ISBN | : |
Author | : Martin J. Pring |
Publisher | : Irwin Professional Publishing |
Total Pages | : 0 |
Release | : 1997 |
Genre | : Investment analysis |
ISBN | : 9780786311767 |
Martin Pring's book is the first in-depth look at the subject of market momentum and is heavily illustrated with graphs and charts that provide visual examples of every theory and concept relating to investments and the markets