Cojumping: Evidence from the US Treasury Bond and Futures Markets

Mardi Dungey and Lyudmyla Hvozdyk ()
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Lyudmyla Hvozdyk: CFAP

No 56, NCER Working Paper Series from National Centre for Econometric Research

Abstract: The basis between spot and future prices will be affected by jump behavior in each asset price, challenging intraday hedging strategies. Using a formal cojumping test this paper considers the cojumping behavior of spot and futures prices in high frequency US Treasury data. Cojumping occurs most frequently at shorter maturities and higher sampling frequencies. We find that the presence of an anticipated macroeconomic news announcement, and particularly non-farm payrolls, increases the probability of observing cojumps. However, a negative surprise in non-farm payrolls, also increases the probability of the cojumping tests being unable to determine whether jumps in spots and futures occur contemporaneously, or alternatively that one market follows the other. On these occasions the market does not clearly signal its short term pricing behavior.

Keywords: US Treasury markets; high frequency data; cojump test (search for similar items in EconPapers)
JEL-codes: C1 C32 G14 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2010-07-20, Revised 2010-07-20
New Economics Papers: this item is included in nep-mic and nep-mst
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Cojumping: Evidence from the US Treasury bond and futures markets (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:qut:auncer:2010_03

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