Maturity effects in the Mexican interest rate futures market

Gurrola, Pedro; Herrerias, Renata

doi:10.1002/fut.20477

Cited by 14 publications

(3 citation statements)

References 26 publications

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“…To isolate the impact of CTT on the return volatility, we control for other factors affecting volatility. A number of studies discuss the relationship between volatility and its determinants like time to maturity, volume, OI, transaction cost and spot price volatility (refer to Gurrola & Herrerias, 2011; Jongadsayakul, 2015; Kadioglu, Kiliç, & Öcal, 2016; Kenourgios & Ketavatis, 2011; Sahoo & Kumar, 2008; Sehgal & Ahmad, 2013; Verma & Kumar, 2010). We incorporate the volatility of the international counterpart exchange as an additional factor to account for its impact on the volatility of the Indian market.…”

Section: Impact Of Ctt On Market Liquidity and Volatilitymentioning

confidence: 99%

Impact of Commodity Transaction Tax on Market Liquidity, Volatility, and Government Revenues: An Empirical Study for India

Sehgal

Agrawal

2019

Vikalpa

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Executive Summary A commodity transaction tax (CTT) of 0.01 per cent is levied on non-agricultural commodity futures trading since 1 July 2013 by the Government of India. This article examines the impact of CTT on market liquidity, volatility and government tax revenues for the Indian commodities market. We use daily data of five sample commodities, namely gold, aluminium, copper, zinc and crude oil available from 1 May 2010 to 31 August 2016. It is found that CTT imposition has destroyed the parity of the Indian commodity futures market with the international markets as CTT is absent on COMEX, LME, NYMEX, and so on. Moreover, evidence of trade migration can be found by drawing a comparison across MCX and international exchanges. This argument is further substantiated by observing the decline in liquidity after the imposition of CTT. It should be further noted that parity with the equity market is also lost as the transaction taxes imposed in equity and commodity markets are not in line with the level of volatilities of the two markets. CTT has also failed to curb speculative pressure as average volatility on major commodities has risen significantly by about 33 per cent post its imposition. Considering the transaction tax, income tax and service tax aspects and decline in the trading volume attributed solely to the CTT imposition, it is found that CTT results in huge revenue loss to the exchequer. It is estimated that at the current CTT rate, government is losing an annual net tax revenue worth ₹30 billion. Even at a lower rate of 0.001 per cent (which is one-tenth of the current rate of 0.01%), the government’s fiscal loss is expected to be about ₹2.50 billion. Even if we make a conservative assumption that CTT accounts for only 25 per cent decline in the trading volumes, the optimal CTT rate, in terms of tax revenue collections, is found at 0.003 per cent, well below the current rate. There is, therefore, no justification for retaining CTT on the commodity futures trading in India as it leads to a huge revenue loss to the government, owing to reduced trading activity and trade migration. Withdrawal of CTT would be ideal for Indian commodities market development, improving its liquidity and making it more internationally competitive.

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Section: Impact Of Ctt On Market Liquidity and Volatilitymentioning

confidence: 99%

Impact of Commodity Transaction Tax on Market Liquidity, Volatility, and Government Revenues: An Empirical Study for India

Sehgal

Agrawal

2019

Vikalpa

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“…They utilize a nonparametric test and a system of seeming unrelated regressions, the paper finds strong support for the maturity effect in agricultural futures. Gurrola and Herrerias [8] investigate the maturity effects for the case of Mexican interest rate futures. Using panel data techniques, they assess the differences in volatility patterns between contracts.…”

Section: Introductionmentioning

confidence: 99%

Samuelson Effect and Hedging Effectiveness in the CSI 300 Index Futures

Wu¹

2018

TEL

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In this paper, we adopt the CSI 300 index futures to discuss the Samuelson effect and dissect the hedging results under both time varying volatility and futures maturities. We propose the conclusion that there is no Samuelson effect embedded in the CSI 300 Index Futures. Meanwhile, this paper infers that the optimal hedge ratios are different that is related to without and with random volatility. The maturity effect for CSI 300 index futures is also found to have a salient effect to the hedging effectiveness and the optimal hedge ratio. There is an important implication in futures hedging for this empirical study. Due to the futures hedging will relate to the time varying maturities, the maturity effect should be incorporated into consideration when hedge activity is in the process. Ignoring to deal with the effect of maturity in hedging will induce uncertain risk exposures and lead to over hedging.

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“…Samuelson (1965), 'vadeye yaklaştıkça vadeli işlem sözleşmesinin volatilitesinin arttığı' hipotezini ileri sürmüştür. Daha sonra bu hipotez; farklı ülkeler ve çeşitli varlıklara dayanan vadeli işlem sözleşmeleri Rutledge (1976), Miller (1979), Dusak (1979), Castelino (1981) Anderson (1985), Milonas (1986), Galloway ve Kolb (1996), Beaulieu (1998), Walls (1999), Garcia (2004), Doung (2005), Verma ve Kumar (2010), Karali ve Thurman (2010), Kenourgios ve Ketavatis (2011) ve Gurrola ve Herrerias (2011) tarafından çalışma konusu yapılmıştır. Bu çalışmaların bazılarında Samuelson hipotezini destekleyen sonuçlara ulaşılırken, bazılarında aksi yönde sonuçlar ortaya çıkmıştır.…”

Section: Introductionunclassified

Vadeli İşlem Sözleşmelerinde Vade Etkisi: Türkiye Örneği

Kadioglu¹,

Kılıç²

2015

eab

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tek paya dayalı vadeli işlem sözleşmelerinin günlük getirilerinin varyansları üzerinden test edilmiştir. Türkiye'de vadeli işlemler 2005 yılından itibaren İzmir Vadeli İşlemler ve Opsiyon Borsası'nda ve 2013 Ağustos'tan itibaren Borsa İstanbul Vadeli İşlem ve Opsiyon Piyasası'nda işlem görmektedir. Türkiye'de 02.01.2008-31.07.2014 döneminde vadeli işlem sözleşmelerinde Samuelson hipotezi desteklenmektedir. Türkiye'de 02.01.2008-31.07.2014 döneminde vadeye yaklaştıkça vadeli işlem sözleşmelerinin volatilitesi artmaktadır.

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Maturity effects in the Mexican interest rate futures market

Cited by 14 publications

References 26 publications

Impact of Commodity Transaction Tax on Market Liquidity, Volatility, and Government Revenues: An Empirical Study for India

Impact of Commodity Transaction Tax on Market Liquidity, Volatility, and Government Revenues: An Empirical Study for India

Samuelson Effect and Hedging Effectiveness in the CSI 300 Index Futures

Vadeli İşlem Sözleşmelerinde Vade Etkisi: Türkiye Örneği

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