Correlations in the Bond–Future Market
We analyze the time series of overnight returns for the bund and btp futures exchanged at liffe (London). The overnight returns of both assets are mapped onto a one–dimensional symbolic–dynamics random walk: The “bond walk”. During the considered period (October 1991—January 1994) the bund–future market opened earlier than the btp–future one. The cross correlations between the two bond walks, as well as estimates of the conditional probability, show that they are not independent; however each walk can be modeled by means of a trinomial probability distribution. Monte Carlo simulations confirm that it is necessary to take into account the bivariate dependence in order to properly reproduce the statistical properties of the real–world data. Various investment strategies have been devised to exploit the “prior” information obtained by the aforementioned analysis.
|Date of creation:||05 Nov 2004|
|Date of revision:|
|Note:||Type of Document - pdf; pages: 10. Preprint pdf version of a paper published in Physica A, vol.269, no.1, p.90-7, 1 July 1999.|
|Contact details of provider:|| Web page: http://220.127.116.11|
When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpfi:0411005. 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: (EconWPA)
If references are entirely missing, you can add them using this form.