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Interplay Between Exchange Traded Currency Futures Markets, Spot Markets and Forward Markets: A Study on India

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  • GURU, ANURADHA

    () (Ministry of Finance, Government of India)

Abstract

Exchange 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.

Suggested Citation

  • Guru, Anuradha, 2010. "Interplay Between Exchange Traded Currency Futures Markets, Spot Markets and Forward Markets: A Study on India," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 45(1), pages 111-130.
  • Handle: RePEc:dse:indecr:0017
    as

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    More about this item

    Keywords

    Exchange Traded Currency Futures; Over-the-Counter Derivatives; Domestic Forwards Markets;

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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