 Do Spot, Futures, and Options Markets Exhibit Price and Volatility Interdependence? Evidence from IndiaAvinash and T. Mallikarjunappa Jindal Journal of Business Research, 2024, vol. 13, issue 1, 100-117 Abstract: This paper analyses the price- and volatility-based interdependency among spot, futures, and options markets in a unified framework. The paper utilizes the vector error correction model generated under the TGARCH framework, the conventional pair-wise Granger causality test, the block exogeneity and vector Granger causality test, and Schwartz–Szakmary’s factor weights to decipher the price interdependence. The paper also uses the DCC-GARCH model to examine the existence of time-varying conditional correlation in volatility. The study finds evidence of the dependency among these three markets with a stronger leading role of spot against futures and options and significant positive/(negative) influence of the previous day’s spot/(futures) price change on options’ price change. Further, the asymmetric impact of price changes on conditional volatility is observed in the case of the spot and futures market. The results also exhibit the existence of time-varying conditional correlation among these markets with spillover effect. Keywords: Asymmetric effect; conditional correlation; equilibrium; futures; DCC-GARCH; options; volatility (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:sae:jjlobr:v:13:y:2024:i:1:p:100-117 DOI: 10.1177/22786821231188028 Access Statistics for this article More articles in Jindal Journal of Business Research |
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