IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Exploiting Volatility Movements in the Sydney Futures Exchange's Bank Bill Contract

Listed author(s):
Registered author(s):

    An appropriate stochastic model was fitted to one year data on the implied volatility of options on 90 day bank accepted bill futures contracts traded in the Sydney Futures Exchange. The model used was ARIMA augmnented with day of the week variables, an option time to maturity variable, and recent values of historic volatility. The high ex-post predicitive accuract of the model was then employed as the central elemnet of a strategy of buy low / sell high volatility. We employed two trading schemes with suitability constructed Delta neutral portfolios comprising bill futures and call and put options on those futures over a period of 6 months, to test whether speculative trading profit could be earned. The existence of trading profits before transaction costs validated the potential of the buy low /sell high volatility strategies to generate speculative profits. The absence of any such trading profits after transaction costs however, showed that the market pricing of these securities is such that the dependencies within implied volatility can not be profitably exploited. This result may be interpreted as evidence supporting an hypothesis of semi-strong form market efficiency.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL:
    Download Restriction: no

    Paper provided by Finance Discipline Group, UTS Business School, University of Technology, Sydney in its series Working Paper Series with number 8.

    in new window

    Length: 16 pages
    Date of creation: 01 Sep 1991
    Publication status: Published as: Hunt, B. F. and Bhar, R., 1993, "Exploiting Volatility Movements in the Sydney Futures Exchange's Bank Bill Contract", International Review of Economics and Finance, 2(4), 403-415.
    Handle: RePEc:uts:wpaper:8
    Contact details of provider: Postal:
    PO Box 123, Broadway, NSW 2007, Australia

    Phone: +61 2 9514 7777
    Fax: +61 2 9514 7711
    Web page:

    More information through EDIRC

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    in new window

    1. Bessembinder, Hendrik & Seguin, Paul J, 1992. " Futures-Trading Activity and Stock Price Volatility," Journal of Finance, American Finance Association, vol. 47(5), pages 2015-2034, December.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:uts:wpaper:8. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Duncan Ford)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.