Correlations in the Bond-Future Market

Gianaurelio Cuniberti, Marco Raberto and Enrico Scalas
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Gianaurelio Cuniberti: Max-Planck-Institut fuer Physik komplexer Systeme, Germany

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Abstract: We analyze the time series of overnight returns for the bund and btp futures exchanged at LIFFE (London). The overnight returns of both assets are mapped onto a one-dimensional symbolic-dynamics random walk: The `bond walk'. During the considered period (October 1991 - January 1994) the bund-future market opened earlier than the btp-future one. The crosscorrelations between the two bond walks, as well as estimates of the conditional probability, show that they are not independent; however each walk can be modeled by means of a trinomial probability distribution. Monte Carlo simulations confirm that it is necessary to take into account the bivariate dependence in order to properly reproduce the statistical properties of the real-world data. Various investment strategies have been devised to exploit the `prior' information obtained by the aforementioned analysis.

Date: 1999-03
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Published in Physica A 269, 90-97 (1999)

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Related works:
Working Paper: Correlations in the Bond–Future Market (2004)
Journal Article: Correlations in the bond-future market (1999)
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:cond-mat/9903220

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