Assessing the Impact of Aluminum Options on Futures Market Volatility: An Empirical Study of China’s Financial Markets

Xiaoyi Zhang, Tamat Sarmidi and Yongxu Chai

SAGE Open, 2025, vol. 15, issue 1, 21582440251321303

Abstract: Since the introduction of SSE 50ETF options in 2015, China’s options market has steadily developed, significantly augmenting participation in the nation’s financial market. The futures market, by offering a diversity of trading strategies, has augmented the capacity of financial services to cater to the real economy and has enriched the toolbox for risk management. This paper investigates the impact of the introduction of aluminum options on the volatility of the corresponding futures market, by examining the daily closing prices of the principal continuous contract of aluminum futures. By incorporating dummy variables into the model, the study evaluates the significance and polarity of the dummy variable coefficients to assess the effect of the aluminum options introduction on futures market volatility. A comparative analysis of coefficients within the TGARCH model prior to and following the emergence of aluminum options is undertaken to explore the asymmetry in the underlying futures market post-options launch. The findings indicate that the listing of aluminum options elevates the volatility of the aluminum futures market. Simultaneously, the informational asymmetry within the aluminum futures market appears to have enhanced. JEL classification codes: G13, G14

Keywords: aluminum options; underlying futures market; TGARCH model; volatility; leverage effect (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:sae:sagope:v:15:y:2025:i:1:p:21582440251321303

DOI: 10.1177/21582440251321303

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