Information Transmission Across Eurodollar Futures Markets

Kian-Guan Lim, Eric Terry and Desmond How
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Kian-Guan Lim: Department of Finance and Accounting, National University of Singapore, 10 Kent Ridge Crescent, Singapore 119260, Singapore
Eric Terry: 105–8 Passy Crescent, North York, ONT M3J3K9, Canada
Desmond How: Fuji Bank, 1 Raffles Place #20–00, OUB Centre, Singapore 048616, Singapore

International Journal of Theoretical and Applied Finance (IJTAF), 1998, vol. 01, issue 02, 235-245

Abstract: Identical contracts traded at two distinct time zones but linked with a mutual offset system allow for round-the-clock trading. It is interesting to investigate the characteristics of information transmission in such a market. In this paper we employ GARCH specifications to model Eurodollar futures interest rate changes in IMM and in SIMEX. We employ the Causality-in-Variance test based on cross-correlation function to test hypotheses on the lead-lag relationships of volatilities between IMM and SIMEX. There is strong evidence of information transmission from IMM to SIMEX, and not vice-versa. However, during the 86 December till 88 September period, including contracts during the October 87 crash, there is evidence of causality also running from SIMEX to IMM.

Date: 1998
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DOI: 10.1142/S0219024998000138

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