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Correlations in the bond-future market

Gianaurelio Cuniberti, Marco Raberto () and Enrico Scalas ()

Physica A: Statistical Mechanics and its Applications, 1999, vol. 269, issue 1, 90-97

Abstract: We analyse 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 modelled 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.

Keywords: Random walk; Complex systems; Financial markets (search for similar items in EconPapers)
Date: 1999
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Related works:
Working Paper: Correlations in the Bond–Future Market (2004) Downloads
Working Paper: Correlations in the Bond-Future Market (1999) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:269:y:1999:i:1:p:90-97

DOI: 10.1016/S0378-4371(99)00083-7

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Physica A: Statistical Mechanics and its Applications is currently edited by K. A. Dawson, J. O. Indekeu, H.E. Stanley and C. Tsallis

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