Five index derivatives with the same expiration days, settlement days, and settlement system have been consecutively traded on the Taiwan Futures Exchange (TAIFEX) since 1998. This paper examines the expiration effects of TAIFEX index derivatives on the underlying stock market between 1998 and...

We examine firms' use of currency derivatives in order to differentiate among existing theories of hedging behavior. Firms with greater growth opportunities and tighter financial constraints are more likely to use currency derivatives. This result suggests that firms might use derivatives to...

Theories predict that launching index futures could affect the price informativeness for the underlying stocks. We test this hypothesis by taking advantage of the introduction of the Nikkei 225 futures contracts in Singapore on September 3, 1986. Employing two alternative statistical methods...

Existing theories predict lower trading volume, but ambiguous changes in price, bid-ask spread, and volatility for the underlying stocks following the advent of index derivatives. We further test these predictions around the introduction of the Samp;P 100 options in March 1983. Controlling for...

Can the liquidity premium in asset prices, as documented in the exchange-traded equity and bond markets, be generalized to the over-the-counter (OTC) derivative markets? Using OTC euro (euro;) interest rate cap and floor data, we find that illiquid options trade at higher prices relative to...

Abstract: This paper examines both the return-volume and volatility-volume movements on Bucharest Stock Exchange, in order to evaluate the impact of changes in stock market liquidity on stock returns and on volatility of returns. We employ linear Granger-causality tests to investigate the...

In this paper we search for optimal hedging strategy in stock index futures markets. We concentrate on the strategy that minimizes the portfolio risk, i.e., minimum variance hedge ratio (MVHR) estimated from a range of time series models with different assumptions of market volatility. They are...

This paper examines the convexity bias introduced by pricing interest rate swaps off the Eurocurrency futures curve and the market's adjustment of this bias in prices over time. Theconvexity bias arises because of the difference between a futures versus a forward contract on interest rates,...

The value and hedge ratio of an American-style option are shown to be closely approximated by a simple quadratic formula. The technique requires the estimation of the values and hedge ratios of just two options: a European option and a twice-exercisable option. These can be computed...

Corporations in developing countries with foreign investment restrictions have begun to issue convertible bonds overseas. Given low covariance of emerging market equity returns with global economic risks, foreign investors should place a relatively high value on these bonds. We use price data...