Interplay Between Exchange Traded Currency Futures Markets, Spot Markets and Forward Markets: A Study on India
AbstractExchange traded currency futures, in the Indian Rupee- Dollar currency pair have recently been introduced in India last year. This paper empirically tests the impact of currency futures trading on volatility and returns of underlying spot exchange rates. The informational advantage in exchange traded currency futures contracts relative to OTC (Over-the-Counter) contract is also tested. Results indicate that both speculative and hedging activities in the futures market for currency have no influence on the volatility in the underlying exchange markets. The returns in futures markets are seen to be driving the returns in spot markets, indicating the information advantage of the futures markets. Further, results indicate that the information content of futures markets is higher than that of forward markets.
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Bibliographic InfoArticle provided by Department of Economics, Delhi School of Economics in its journal Indian Economic Review.
Volume (Year): 45 (2010)
Issue (Month): 1 ()
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- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
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