Korean Treasury Bond Research Articles

비트코인의 가격변화가 한국 국고채 시장에 미친 상호 영향에 관한 실증적 연구

이 연구는 국고채시장의 주요 지표인 한국국고채총수익지수 주간지수와 비트코인 시장 지표인 비트코인 주간 가격에 미치는 상호 영향을 실증적으로 분석하고자한 연구이다. 한국국고채총수익지수 주간지수와 비트코인 연구에서 사용한 자료는 2010년 10월 23일 부터 2018년 10월 13일까지 417개의 한국국고채총수익지수 주간지수와 비트코인 주간 가격 자료이다. 비트코인 주간 가격과 한국국고채총수익지수 주간지수의 두 지표간의 인과관계와 상호영향력을 살펴봄으로써 비트코인 주간 가격과 국고채 시장금리 간 영향력의 정도를 분석하고자 한다. 비트코인 주간 가격과 한국국고채총수익지수 주간지수 시계열자료의 단위근 검정, 공적분(cointegration)검정, 한국국고채총수익지수 주간지수와 비트코인 주간 가격의 예측오차의 분산분해와 충격반응분석 모형, 비트코인 주간 가격과 한국국고채총수익지수 주간지수 자료간의 Granger인과관계(Granger causality)검정을 실시하였다.<BR> 비트코인 주간 가격과 한국국고채총수익지수 주간지수의 연구의 실증분석 주요결과는 다음과 같다. 첫째, 한국국고채총수익지수 주간지수와 비트코인 주간가격 자료의 원시계열자료에 대한 안정성검정 결과 불안정적인 것으로 나타났다. 둘째, 한국국고채총수익지수 주간지수와 비트코인 주간가격 자료의 1차 차분시계열자료에 안정성검정 결과는 안정적임을 알 수 있었다. 셋째, 차분 전에는 한국국고채총수익지수 주간지수와 비트코인 주간가격 자료 간에는 모두 공적분관계가 존재하지 않는 것으로 나타났으나 차분 후에는 한국국고채총수익지수 주간지수와 비트코인 주간가격 자료 간에는 모두 공적분관계가 존재하는 것으로 나타났다. 넷째, 비트코인 가격 분산 분해에서 비트코인 가격의 변화는 비트코인 주간가격 자체의 내재적 변화가 99% 이상을 설명하고 있고, 한국국고채총수익지수 주간지수 분산분해에서 한국국고채총수익지수 주간지수의 설명력은 97% 이상을 설명하고 있다. 다섯째, 비트코인 가격 증감률의 변화는 한국국고채총수익지수 주간지수 증감률에 그레인저 인과관계가 있는 것으로 나타났다. 마지막으로 금융채 시장금리와 비트코인 가격 간의 상관관계는 0.508047로 양(+)의 관계를 보여 주고 있다.

Relationship between Financial Income Tax Reform and Implicit Tax: Case of South Korean Bond Market

In South Korea, comprehensive taxation, which is a combination of income from various sources, has been applied to financial income exceeding a certain amount. However, criticism continues to be raised that the level of financial income is lower compared with other incomes, and South Korea’s taxation authorities lowered the standard amount in 2013, thereby increasing the tax burden on financial income. This study aims to analyze the response of the bond market to the reduction of the standard amount of comprehensive taxation for financial income. This study analyzes the implicit tax phenomenon that the pre-tax return of bonds with large tax benefits is relatively low, in Korean bond market. It suggests that the sustainability level of the bond market has increased as the difference between the yield of the National Housing Bond, which has a large tax burden after 2013, and that of the general Korean Treasury Bond has decreased to a statistically significant level. Therefore, this study proposes that tax reforms on financial income may affect not only the level of tax burden but also the macro-economy of money transfers among financial instruments and financial markets.

Who Improves or Worsens Liquidity in the Korean Treasury Bond Market?

This study analyzes how heterogenous institutional investors affect Korean Treasury bond liquidity in the over-the-counter (OTC) market using a unique individual bond-level data set over the period from January 2007 to December 2016. We find that bonds with higher foreign bond holding have a greater price impact of trades and lower trading activities, all indicating lower liquidity. The liquidity-reducing effects of foreign investors are stronger for off-the-runs than on-the-runs and for the post-crisis period (2010-2016) than the crisis period (2007-2009). In contrast, bond holdings by domestic financial investment companies contribute to enhancing liquidity. Furthermore, the effect of bond holdings by domestic banks, insurance companies and pension funds on liquidity varies with issuance maturities.

Effect of Margin Requirement on Default Risk and Liquidity in the Korean Futures Market

Margin requirements are often viewed as an effective policy tool to prevent the default risk and maintain market stability. For the Korean futures market, this paper examines whether the margin requirements work normally as a tool to prevent default risk and margin changes have impact on futures trading activity. KOSPI200 stock index futures, USD (U.S. Dollar) futures, and 3-year KTB (Korean Treasury Bond) futures are included in the sample for the period from 2010 to 2015. Using the simulation method assuming the worst situation, we find that the possibility of default occurs once for KOSPI200 futures, twice for 3-year KTB futures, and 7 times for USD futures during the sample period. This result suggests that active margin requirement policy is necessary to prepare for financial market turbulence. In addition, we find that the margin changes do not have a significant impact on the futures trading activity, suggesting that decreases in margins are not effective means to improve liquidity in the Korean futures market

Price Discovery and Foreign Participation in Korea's Government Bond Futures and Cash Markets

This paper examines the impact of foreign participation in Korean Treasury Bond (KTB) futures and its role in price discovery, using daily transactions data from the over‐the‐counter market and from the Korea Exchange for the futures. Our analysis suggests that foreign trading in the KTB futures market leads the price discovery process for the underlying bonds. Empirical results show that foreigners’ daily net long positions in the futures market exert significant influence in KTB and KTB futures prices. We also find that it is the unexpected component of foreign investors’ net long futures positions that explains a significant share of the pricing effects. Our empirical results also suggest that information transmission between cash and futures markets has improved significantly in the crisis and post‐crisis period while local market participants have become better in extracting information content from market transactions. © 2016 Wiley Periodicals, Inc. Jrl Fut Mark 37:23–51, 2017

Dislocations in the Currency Swap and Interest Rate Swap Markets: The Case of Korea

This article empirically investigates the determinants of the deviations from fundamental levels of both the currency swap (CRS) and the interest rate swap (IRS) rates in Korea. This study also analyses the inter‐linkages between the swap and bond markets in Korea. To this end, a rolling VAR model is estimated incorporating the CRS rate, the IRS rate and the Korean Treasury bond (KTB) rate. It is found that hedging activities and risk factors are significant determinants of the deviations from fundamental levels of the IRS as well as the CRS rate in Korea. Moreover, the covered interest parity (CIP) deviation in the CRS market plays a role in explaining the deviation from the fundamental level of the IRS rate. There are contemporaneous links among the CRS rate, the IRS rate and the KTB rate, and a CRS rate shock significantly affects both the IRS and the KTB rates. © 2014 Wiley Periodicals, Inc. Jrl Fut Mark 35:455–475, 2015

Modeling and Forecasting Realized Volatilities of Korean Financial Assets Featuring Long Memory and Asymmetry

AbstractLong memory, asymmetry, volatility spillover aspects of the realized volatilities (RVs) of the log returns of the Korean KOSPI, the Korean won/US dollar exchange rate, Korean treasury bond futures, and the US S&amp;P 500 index are investigated in this paper. For all RVs, significant long memories and asymmetries are identified, which can improve forecasts if suitably used. A new long memory asymmetric threshold HAR‐RV (heteroskedastic autoregressive realized volatility) model is proposed. The new model shows explicit differences between the coefficients of daily, weekly, and monthly RVs for days of positive returns and those for days of negative returns. By analyzing the RVs, we find that pseudo out‐of‐sample forecast performance of the proposed model is better than a widely used existing asymmetric long memory model in about half of cases considered. The new model as well as another existing asymmetric model show that forecast improvements due to implied volatilities for the S&amp;P 500 index decrease when asymmetries in RVs are accounted for. The two asymmetric models find significant decompositions of the spillover effects from the influential market S&amp;P 500 index to the influenced market KOSPI (or from the KOSPI to the Korean won/US dollar exchange rate) into three oscillating components: substantial positive short‐term daily spillovers, moderate negative weekly spillovers, and somewhat positive long‐term monthly spillovers.

Price Discovery in the Korean Treasury Bond Futures Market

Price Discovery in the Korean Treasury Bond Futures Market

Analysis of price fluctuations in futures exchange markets

We show that the fluctuations of the tick-by-tick logarithmic price in a futures market can be described in terms of the Fokker–Planck equation (FPE). We calculate the corresponding drift and diffusion coefficients and argue that these values can contain some information pertaining to the market state. It is particularly showed that the Korean treasury bond (KTB) futures is well described by a FPE and has a similar structure to turbulence.

Dynamical mechanism of two-phase phenomena in financial markets

Two-phase behavior of the Korean treasury bond (KTB) futures in the Korean exchange market is investigated in this study. To show that the two-phase phenomena are due to heavy-tailed behavior of distribution of price returns, actual data from the KTB futures market with shuffled data and a generated time series are examined according to the Brownian process. In addition, we study the correlation inherent in the KTB futures and its Brownian walk, describing the extent to which the volatility clustering plays a crucial role in equilibrium and nonequilibrium states of financial markets. It is shown that the two-phase behavior essentially results from heavy-tailed behavior of the distribution of price returns. This two-phase behavior does not appear to be relevant to volatility clustering.

Volatilities, traded volumes, and the hypothesis of price increments in derivative securities

A detrended fluctuation analysis (DFA) is applied to the statistics of Korean treasury bond (KTB) futures from which the logarithmic increments, volatilities, and traded volumes are estimated over a specific time lag. In this study, the logarithmic increment of futures prices has no long-memory property, while the volatility and the traded volume exhibit the existence of the long-memory property. To analyze and calculate whether the volatility clustering is due to a inherent higher-order correlation not detected by with the direct application of the DFA to logarithmic increments of KTB futures, it is of importance to shuffle the original tick data of future prices and to generate a geometric Brownian random walk with the same mean and standard deviation. It was found from a comparison of the three tick data that the higher-order correlation inherent in logarithmic increments leads to volatility clustering. Particularly, the result of the DFA on volatilities and traded volumes can be supported by the hypothesis of price changes.

DYNAMICS OF AVALANCHE ACTIVITIES IN FINANCIAL MARKETS

We study the dynamical properties of avalanche activities in the Korean Treasury Bond (KTB) futures price and the S&amp;P 500 stock index. We apply the detrended fluctuation analysis, multiscale sample entropy and wavelet coefficient correlation to them, which revealed the scale-free dynamics of the bursting time series, avalanche size, and laminar time. We found that the laminar time and the avalanche size are anti-correlated in a short scale but in a large scale strongly correlated in KTB503, and are strongly correlated over all scales in S&amp;P 500.

HURST EXPONENTS IN FUTURES EXCHANGE MARKETS

The dynamical behavior of the Korean treasury bond (KTB) futures is investigated using a modified rescaled range (R/S) analysis. Lo's modified R/S analysis as well as classical Hurst's R/S statistics are utilized in order to analyze tick data of KTB futures. The Hurst exponent can be estimated by both classical and modified R/S statistics. The results of this study show that a series of returns has larger long-term correlation as the time lag increases. The Hurst exponent that shows a memory effect for the tick data of KTB futures is larger than 0.5, while the Hurst exponent has a value of nearly 0.5 for the corresponding shuffled data.

Dynamical stochastic processes of returns in financial markets

We study the evolution of probability distribution functions of returns, from the tick data of the Korean treasury bond (KTB) futures and the S&P 500 stock index, which can be described by means of the Fokker–Planck equation. We show that the Fokker–Planck equation and the Langevin equation from the estimated Kramers–Moyal coefficients can be estimated directly from the empirical data. By analyzing the statistics of the returns, we present quantitatively the deterministic and random influences on financial time series for both markets, for which we can give a simple physical interpretation. We particularly focus on the diffusion coefficient, which may be important for the creation of a portfolio.

Tests of alternate models for the pricing of Korean Treasury bond futures contracts

It is known that KTB futures contracts are significantly underpriced when the model price is calculated using the ad hoc cost-of-carry model employed in industry. This paper examines whether this underpricing phenomenon is caused by using the wrong model to price the futures contracts. This paper documents that the difference between the model price and the market price of KTB futures decreases substantially if the correct term–structure-based model is used to estimate the model price of KTB futures. In addition, even though the underpricing phenomenon can be exploited to generate some trading profits, the profits cannot be regarded as arbitrage profits. Thus, we believe that the underpricing phenomenon is illusory, and that much of it can be attributed to the wrong model being used in the industry.

Estimating the Term Structure of Interest Rates and Default Risk Embedded in Korean Corporate Bonds

This article uses a Kalman filter to fit yields of investment-grade corporate bonds to the model of instantaneous default risk, based on Duffee (1999. Review of Financial Studies. 12. PP. 197-226). The first part of this article fits the term structure of default-free interest rates to a translated two-factor square-root diffusion model. The parameters in the two-factor model are estimated by using a quasi-maxirnum-likelihood estimator in a state-space model in the Korean treasury bond market. A Kalman filter is used to estimate the unobservable factors. The two-factor model successfully incorporates random variations in the slope of the term structure and the level of interest rates‘ After estimating the default-free term structure of interest rates, the second part of this article extends the model to noncallable corporate bonds‘ This is done by assuming that the probability of default follows a translated square-root diffusion process with the possibility of being correlated with default-free interest rates. The parameters of the process are estimated for investment-grade corporate bonds including AM. AA, A. and BBB. Empirical results show that the default risk is negatively correlated with default-free interest rates and confirm that the default risk is greater for lower grades. In addition, the estimated model successfully produces the term structures of credit spreads for corporate bonds and show that the credit spreads for lower grade bonds are more steeply sloped than those for higher grade bonds. These results show that Duffee's model can reasonably account for the observed corporate bond prices in the Korean bond market.

Korean Treasury Bond Futures Pricing Model

This paper proposes two alternative methods which are used for pricing the theoretical value of the KTB futures on the non-traded underlying asset; first method is to use the CKLS model, under which the volatility of interest rate changes is highly sensitive to the level of the interest rate, and then employ binomial trees to compute the theoretical value of futures, second one is to use the multifactor Vasicek model considering correlations between yields-to-maturity and then employ the Monte Carlo simulation to compute it. In the empirical study on KTB303 and KTB306, an CKLS methodology is superior to the conventional KORFX method based on the cost-of-carry model in terms of the size of difference between market price and theoretical price. However, the phenomena, the price discrepancy using the KOFEX methodology is very small for all test perlod, implies that the KOFEX one is being used for the most market participants. The reasons that an multifactor Vasicek methodlogy is performed poorly in comparison to another methods are 1) the Vasicek model might be not a good model for explaining the level of interest rates, or 2) the important point considered by the most market participants may be on the volatility or interest rate, not on the correlations between yields-to-maturity.

Multifractal Measures for Bond Futures Prices in Futures Exchange Market

We study the tick dynamical behavior of the bond futures price using the rescaled range analysis (R/S analysis) in Korean futures exchange market. For our case, the multifractal Hurst exponents with long-run memory effects can be obtained from two kinds of Korean treasury bond futures transacted recently. It exists no crossover for the Hurst exponents at charateristic time scales. Particularly, we find that our result for probability distribution of prices is similar to a Lorentz distribution different from fat-tailed properties of bond futures price.

DYNAMICAL BEHAVIOR OF CONTINUOUS TICK DATA IN FUTURES EXCHANGE MARKET

We study the tick dynamical behavior of the bond futures in Korean Futures Exchange (KOFEX) market. Since the survival probability in the continuous-time random walk theory is applied to the bond futures transaction, the form of the decay function in our bond futures model is discussed from two kinds of Korean Treasury Bond (KTB) transacted recently in KOFEX. The decay distributions for survival probability are particularly displayed stretched exponential forms with novel scaling exponents β = 0.82 (KTB203) and 0.90 (KTB112), respectively, for our small time intervals. We obtain the scaling exponents for survival probability ∊ = 17 and 18 decayed rapidly in large time limit, and our results are compared with recent numerical calculations.

Pricing of the Korean Treasury Bond Futures Using the Term Structure of Interest Rates

This paper shows the limitation of the cost-of-carry model which is used for pricing the theoretical value of the KTB futures, and proposes an alternative pricing model based on the term structure of interest rates. Under the assumption of 1-factor term structure, this paper treats the theoretical price of KTB futures price as a risk-neutral expectation of payoff function at maturity and derives the approximated formula for pricing the KTB futures. As compared with our price of KTB futures using the term structure of interest rates, the conventional KOFEX price based on the cost-of-carry model tends to be overvalued as the time to maturity increases. This result is due to the difference between the futures and forward prices which is caused by treating the futures contract as the forward contract in the conventional KOFEX pricing model. In particular, this discrepancy becomes more significant when the price of underlying asset and the interest rates are negatively correlated and the time to maturity is longer. The bond futures contract is a typical example of financial instrument whose price has a negative correlation with interest rates