Understanding Volatility - the Case of the Introduction of Futures Trading in the National Stock Exchange, India

Understanding Volatility - the Case of the Introduction of Futures Trading in the National Stock Exchange, India
Author: Saurabh Kumar
Publisher:
Total Pages: 13
Release: 2002
Genre:
ISBN:

This project attempts to investigate the effect of the introduction of Futures trading in the National Stock Exchange, India (NSE) and get insights into the effect upon the volatility of the NSE. The underlying spot market volatility is estimated using symmetric GARCH methods. Any increase in stock market volatility that has followed the onset of futures trading has generally been taken as justifying the traditional view that the introduction of futures markets induces destabilizing speculation. This has led to calls for greater regulation to minimise any detrimental effects. An alternative view is that futures markets provide an additional route by which information can be transmitted, and, therefore, increased spot market volatility may simply be a consequence of the more frequent arrival, and more rapid processing of information. Thus, futures trading may be fully consistent with efficiently functioning markets.This paper attempts to investigate the change, if any, in the volatility observed in the Indian stock market due to the introduction of futures trading. The change in the volatility is compared not only in absolute levels of volatility but also in terms of the structure of the volatility. This is done to give insights into the way the futures market is influencing the Indian spot market's volatility.

Derivatives Trading and Volatility - a Study of the Indian Stock Markets

Derivatives Trading and Volatility - a Study of the Indian Stock Markets
Author: Ash Narayan Sah
Publisher:
Total Pages: 15
Release: 2006
Genre:
ISBN:

Equity derivatives trading started on June 9, 2000 with introduction of stock index futures by Bombay Stock Exchange (BSE). National Stock Exchange (NSE) also commenced its trading on 12 June, 2000 based on Samp;P Nifty. Subsequently, other products like stock futures on individual securities, index options and options on individual securities were introduced. This paper tries to examine the impact of derivatives trading on the volatility of Samp;P Nifty and BSE Sensex using ARCH/GARCH technique. It also examines the behaviour of volatility of other indices such as Nifty Junior, NSE 200, Samp;P Nifty 500, BSE-100 and BSE-200 to see whether the market wide volatility has declined over the sample period. Further, surrogate indices like BSE100 and Nifty Junior are used to assess whether the introduction of derivatives per se has been instrumental or the volatility has plummeted in line with general fall in market wide volatility. The results established that introduction of futures and options have negligible or no effect on the volatility as evident from GARCH (1, 1) model. When surrogate index taken into consideration Samp;P Nifty showed decline in volatility while BSE Sensex exhibited rise in volatility. EGARCH model indicates fall in volatility in case of all indices.

An Analysis of Price Volatility, Trading Volume and Market Depth of Stock Futures Market in India

An Analysis of Price Volatility, Trading Volume and Market Depth of Stock Futures Market in India
Author: Srinivasan Kaliyaperumal
Publisher: GRIN Verlag
Total Pages: 144
Release: 2018-03-13
Genre: Business & Economics
ISBN: 3668659958

Project Report from the year 2010 in the subject Business economics - Investment and Finance, , course: Ph. D, language: English, abstract: Every modern economy is based on a sound financial system and acts as a monetary channel for productive purpose with effecting economic growth. It encourages saving habit by throwing open and plethora of instrument avenues suiting to the individuals requirements, mobilizing savings from households and other segments and allocating savings into productive usage such as trade, commerce, manufacture etc. Thus a financial system can also be understood as institutional arrangements, through which financial surpluses are mobilized from the units generating surplus income and transferring them to the others in need of them. In nutshell, financial market, financial assets, financial services and financial institutions constitute the financial system. The activities include exchange and holding of financial assets or instruments of different kinds of financial institutions, banks and other intermediaries of the market. Financial markets provide channels for allocation of savings to investment and provide variety of assets to savers in various forms in which the investors can park their funds. At the same time, financial market is one that integral part of the financial system which makes significant contribution to the countries’ economic development. It establishes a link between the demand and supply of long-term capital funds. The economic strength of a country depends squarely on the state of financial market, apart from the productive potential of the country. The efficient allocation of fund by the capital market depends on the state of capital market. All the countries therefore focus more on the functioning of the capital market. Indian financial market has faced many challenges in the process of effecting more efficient allocation and mobilization of capital. It has attained a remarkable degree of growth in the last decade and in continuing to achieve the same in current decade also. Opening up of the economy and adoption of the liberalized economic policies have driven our economy more towards the free market. Over the last few years, financial markets, more specifically the security market were experiencing a lot of structural and regulatory changes. The major constituents of financial market are money market and the capital market catering to the type of capital requirements.

Futures Trading and Spot Market Volatility in India

Futures Trading and Spot Market Volatility in India
Author: Pretimaya Samanta
Publisher: LAP Lambert Academic Publishing
Total Pages: 92
Release: 2012-01
Genre:
ISBN: 9783847373360

Derivatives in the securities markets were launched mainly with the twofold objective of risk transfer and to enhance liquidity in the underlying cash market and thereby ensuring better market efficiency. In the late 1990s, various derivative instruments were introduced in the equity segment of major markets worldwide. It further complicated the volatility behavior of these markets as derivatives opened new avenues for hedging and speculation. Since futures trading encourage speculation, the debate on the impact of speculators on the cash market volatility intensified with the introduction of futures trading. This constitutes the main research problem of this study and the objectives have been set out in accordance to this phenomenon of the derivatives market. The current research work examines the effect of the introduction of futures trading on the volatility of the underlying cash market in India. The standard univariate GARCH model has been used to capture the time-varying nature of volatility and volatility clustering phenomenon in the data. This research study adds a new dimension to the existing literature on futures trading and will be useful to all the market participants.

Impact of Single Stock Futures on the Volatility of Underlying Indian Stocks

Impact of Single Stock Futures on the Volatility of Underlying Indian Stocks
Author: Thadavillil Jithendranathan
Publisher:
Total Pages:
Release: 2014
Genre:
ISBN:

This study aims to test the influence of the introduction of derivative contracts on the volatility of the underlying asset. This study uses the introduction of single stock futures (SSF) listed on the National Stock Exchange of India to test the influence on the volatility of the underlying stock returns. An interesting aspect of the Indian SSF market is that for many of the stocks the volume traded on the SSF market is higher than that of the underlying stock market. Results support the hypothesis that introduction of single stock futures reduce the volatility of the returns of the underlying stock.

Stock Price Volatility in National Stock Exchange of India

Stock Price Volatility in National Stock Exchange of India
Author: Sumathi D.
Publisher:
Total Pages: 9
Release: 2019
Genre:
ISBN:

Economic status of India is greatly imitated by the introduction of new economic policy in 1991. The Indian Capital Market has perceived a marvelous progression. There was an outburst of investor interest during the nineties and an equity cult emerged in the country. Foreign Exchange Regulations Act is one such legislation in this direction. An important recent development has been the entry of Foreign Institutional Investors as participants in the primary and secondary markets for industrial securities. In the past several years, investments in developing countries have increased remarkably. Among the developing countries, India has received considerable capital inflows in recent years. We apply the GARCH (1, 1) (General Autoregressive Conditional Heteroscedasticity) framework to on selected representative stock indices. The findings reveal that the GARCH (1, 1) model successfully captures nonlinearity and existence of volatility. The analysis suggests indicates a long persistence of volatility in Indian stock market especially National Stock Exchange (NSE) of India. The preliminary analysis of data set suggests that volatility in the Indian stock market is time varying in nature, persist to form clusters and has a long memory process. These findings of the data characteristics have been consistent with previous studies of Indian markets and justify the application of GARCH type models. The detailed analysis shows that the TGARCH (1,1) model outperforms in estimating, predicting and forecasting the stock market volatility.

A Temporal Analysis of Intraday Volatility of Nifty Futures on the National Stock Exchange

A Temporal Analysis of Intraday Volatility of Nifty Futures on the National Stock Exchange
Author: Ritvik Singh
Publisher:
Total Pages: 13
Release: 2018
Genre:
ISBN:

This paper aims to establish trends in intraday volatility in context of the Indian stock market and analyze the impact of development in the Indian economy on its stock market volatility. One minute tick data of Nifty 50 futures from Jan 1, 2011 to Aug 31, 2018 was used for the purpose of this research. Volatility was computed for each day of week and various time intervals. Our analysis shows evidence of the expected U-shaped pattern of intraday volatility (higher at the beginning and end of the day). We also observed a decline in the hourly volatility over the time period studied. However, sufficient evidence to determine the impact of development in the Indian economy on volatility in the stock market was not found.