Open Interest Research Articles

The Impacts of Futures Introduction on Spot Market Volatility: Evidence from the Bitcoin Market

The impact of Bitcoin futures introduction on the underlying Bitcoin volatility has been a controversial topic. Conflicting results had been obtained with different sample periods and methodologies. To address this debate, this study examines the impacts of Bitcoin futures trading on spot market volatility in the short and long run. Using exponential GARCH model, we introduce a dummy in the variance equation to capture the changes in the volatility before and after the introduction of Bitcoin futures. We find that after Bitcoin futures introduction, spot return volatility decreases in the short run, but increases in the long run. Besides, in the short run, there exists an inverse leverage effect before and after the introduction of futures; in the long run, it changes from an inverse leverage effect to a usual leverage effect. Finally, we examine whether greater futures trading activity, including volume and open interest, is associated with greater Bitcoin volatility. To do so, we decompose each proxy for trading activity into expected and unexpected components and document that Bitcoin volatility covaries positively with unexpected futures trading volume, but negatively related to forecastable futures trading volume.

Forecasting Futures Trading Volume for Cotton using Vector Auto Regression and ARIMA Model

This study involves comparing the forecasting performance of the ARIMA model and Vector Auto Regression model. Monthly data of open price, close price, mean cash price, open interests, spot price, and trading volume of cotton futures are used for analysis. Trading volume is taken as a dependent variable. Data was checked for stationarity using Augumented Dickey-Fuller test based on the p-value. Trading volume was stationary at level and all other variables were stationary at first difference. The optimal ARIMA model was selected based on AutoCorrelation Function plot, Partial Auto Correlation Function plot, and lower Akaike Information Criteria , Bayesian Information Criteria values. The optimal model was found to be ARIMA (2, 0, 0). The optimal lag for VAR model was selected based on AIC and BIC. The forecast is obtained based on the coefficients of the model. The forecasted values were compared using RMSE, MAPE, MAE and Theil U Statistic. Based on the results, ARIMA is better at forecasting the futures trading volume of cotton than VAR.

Determinants of Option Markets Liquidity: An Empirical Analysis on European Markets

This paper attempts to discover the macroeconomic determinants of liquidity in option markets, which is measured by the open interest, the volume (number of transactions), the implied volatility and the bid-ask spread. The macroeconomic determinants of each European economy employed in this study are 1) the gross domestic product, the gross domestic product per capita, the unemployment rate, the income tax rate, the corporate tax rate, the population, the bank capital-to-assets ratio, the inflation, the 10-year government bond yield rate, 2) the market capitalization (of listed domestic companies), the Standard & Poor’s global equity indices (annual % change), the stocks traded (turnover ratio of domestic shares (%) and total value), which show the breadth of a country’s capital markets, as well as 3) indices like the economic freedom, the freedom from corruption, the fiscal freedom, the business freedom, the investment freedom, the financial freedom. Panel data linear regressions are performed to find evidence that the liquidity of the option markets is mainly affected by macroeconomic and capital market determinants, whereas the economic freedom indicators play a less significant role. The findings can be of use to the policymakers and option market authorities who wish to increase the liquidity of these markets. The novelties introduced by this study are the consideration of macroeconomic variables as determinants of option market liquidity and the subsequent use of these determinants in order to make policy recommendations.

Credit default swap market retrospective: observations from the 2008–9 financial crisis and the onset of the Covid-19 pandemic

Global credit default swap (CDS) markets experienced unprecedented whipsaw spread realizations during March and April 2020. While the main source of market uncertainty was the Covid-19 pandemic, the March 2020 oil price war between Saudi Arabia and Russia added “fuel to the fire”. In this paper credit market fluctuations, measured by the levels of the main and most heavily traded index instruments, are analyzed and compared with the analogous index realizations during the 2008–9 financial crisis. The Covid-19 credit market fluctuations exceeded those during the financial crisis in terms of daily amplitudes and the rates at which spread tightening followed the initial spread widening. The fast-moving credit markets led to record index trading and clearing activity at all three major CDS clearinghouses. Clearinghouse volumes and general clearing trends during the onset of the Covid-19 pandemic are presented in the context of the observed explosion in market volatility. The continuous development and investment in central clearing over the last 10 years greatly contributed to the financial stability of the CDS markets during the Covid-19 crisis, providing increased market transparency, capital efficiency and robust risk management services in the presence of record daily volumes, open interest levels and mark-to-market payments.

Has Manipulation in the VIX Decreased?

Manipulation in the VIX settlement can cause significant losses to investors. Analysing high-frequency data, we present indications of VIX manipulation accelerating since 2017. Deviations have an upward direction and average at around 6%. Specific effects accompany settlement days. The put/call ratio of underlying options surges by 10.9%. A time series decomposition demonstrates that this difference exceeds the day-specific variations of all other days by 80%. Data on open interest point towards leveraged funds, who systematically gather additional exposure in the seven days before settlement. All other players seem to reduce their VIX exposure before settlement. After 2017, the market seems to accustom itself and incorporate deviations more easily.

Asymmetries and the Market for Put Options

We study implications of asymmetries in both preferences and fundamentals for put option demand across investors and the resulting market behavior. A heterogenous-agent model populated by investors with asymmetric preferences alongside standard risk-averse agents rationalizes the size and the dynamics of the put option market, the expensiveness of put options, and the link between put option demand and the stock market in equilibrium. Disappointment-averse investors take long positions in put options, but only if their reference point is lower than the certainty equivalent. In the cross-section of options with multiple strikes, disappointment-averse investors’ open interest peaks for the at-the-money contracts.

Modeling and Forecasting Gold Prices

The aim of this paper is to explore the reasons of gold price volatility. It analyses the information function of the gold future market by open interest contracts as speculation effect, and further fundamental factors including inflation, Chinese yuan per dollar, Japanese yen per dollar, dollar per euro, interest rate, oil price, and stock price, in the short-run. The study proceeds to build a Dynamic OLS model for long-run equilibrium to produce reliable gold price forecasts using the following variables: gold demand, gold supply, inflation, USD/SDR exchange rate, speculation, interest rate, oil price, and stock prices. Findings prove that in the short-run, changes in gold price does granger cause changes in open interest, and changes in Japanese yen per dollar does granger cause changes in gold price. However, in the long-run, the results prove that gold demand, gold supply, USD/SDR exchange rate, inflation, speculation, interest rate, and oil price are associated in a long-run relationship.

A randomized controlled trial of a web-based personalized feedback intervention targeting frequent indoor tanning bed users: Engagement, acceptability, and preliminary behavioral outcomes.

Frequent indoor tanning bed use is an established public health concern, yet research on tanning cessation interventions for frequent tanners is lacking. We describe the protocol for a brief, web-based tanning behavior change intervention and present evidence that it is acceptable and engaging to frequent indoor tanners. Lower tanning rates were not observed among participants receiving the intervention in a randomized controlled trial but participants' interest in changing tanning increased. This intervention could be a useful approach to increasing frequent tanners' interest in behavior change and openness to engaging within a more intensive, multi-component tanning cessation program.Trial Registration: NCT03448224 Clinical Trials.gov (https://clinicaltrials.gov/ct2/show/NCT03448224?cond=NCT03448224&draw=2&rank=1).

Informational Role of Open Interest and Transaction Volume of Options: A Meta-Analytic Review

The study examines the research literature pertaining to the informational content of open interest and transaction volume in a systematic manner. Our review upheld their informational role in estimating the price of the underlying stock in future, in predicting future volatility and in ascertaining the market behaviour around corporate/macro-economic announcements with mixed directional effect. Further, through well-defined inclusion/exclusion criteria, we choose 38 research works to uncover the factors and conditions upon which open interest and transaction volume are more informative via meta-regression. The temporal and spatial factors indicate that open interest and transaction volume are more informative in an emerging market as compared to a developed market.

Determinants of a successful commodity contract: Evidence from the Indian agriculture futures market

In this study, I examine the determinants of a successful futures contract and explore whether an exhaustive checklist of criteria such as the one proposed by the Securities and Exchange Board of India (SEBI) guarantees the success of a commodity contract. Using panel random-effects method on 30 agriculture futures contracts trading in India from 2003–2016, I find that volatility in spot prices is the most crucial determinant, followed by hedging effectiveness and open interest of a futures contract, whereas the size of the underlying spot market, compulsory settlement, and government-imposed ban on futures trading negatively impacts the success of futures contracts. This study has important implications for contract design and new product launches.

The Impact of Introducing Nighttime Trading Hours: Revisiting the Chinese Commodity Futures Market

Chinese futures exchanges began to implement nighttime trading hours in 2013. Years after, most Chinese commodity futures have adopted night trading session, and the Chinese market also has experienced fast development and become more accessible to foreign traders. Using daily data of commodity futures, we explore the influence of the nighttime trading policy on the price dynamics of the domestic Chinese futures market. Empirical results from this study suggest an improvement in the overall efficiency of Chinese commodity futures prices. In particular, the positive (negative) relationship between volatility and trading volume (open interest) becomes stronger after the launching of nighttime trading session.

Strategy workshops with wider participation: trust as enabler

PurposeA wider participation from outside the top management team can support the strategy creation and execution of firms through improving access to knowledge, increasing innovativeness and creating legitimacy for the strategy. However, creating a climate of trust where ideas are freely expressed and challenged is easier said than done. This paper thus focuses on trust in strategizing, in particular in strategy workshops with wider participation.Design/methodology/approachThe analysis is based on qualitative data from 10 strategy-making processes consisting of a total of 28 strategy workshops. Data were collected through interviews and joint reflections with the leaders, external facilitators and consultants, as well as through action research.FindingsThis study identifies three factors that influence trust in strategy workshops with wider participation, namely opening up the conversation, clarity of the participative process and delivering with honest intent. These factors could play crucial roles in creating the trust needed for wider participation in strategy workshops.Practical implicationsThis paper provides strategy actors (e.g. leaders, consultants) with actionable knowledge about what strategy workshops with a wider circle of participants require to create trust.Originality/valueThis study relates to the ongoing and increased interest in openness for strategy-as-practice in general and open strategy in particular. Moreover, it contributes to the discussion that the boundaries between strategizing and change tend to become blurry. Therefore, the present paper contributes to the theory and practice of strategy creation, strategy execution and change by investigating wider participation in strategy workshops.

Index Future Trading and Spot Market Volatility in Frontier Markets: Evidence from Ho Chi Minh Stock Exchange

This study investigates the impact of index futures trading on the spot market volatility for Ho Chi Minh Stock Exchange (HOSE). The data used in this study are daily VN30-Index, future trading volume and open interests covering the period from March 18th, 2015 to January 2nd, 2020. In order to capture the asymmetric effect, the EGARCH(1,1) model is employed in this study. It is found that the introduction of index future trading leads to the increase the spot market volatility. In addition, our empirical findings reveal that the impact of recent news on spot market volatility in the post-index future period is greater that than the pre-index future period; and the market volatility in the post-futures period is more persistent than in the pre-futures period. Moreover, the level of asymmetric effect on the market volatility in the post-index future period is significantly lower than that for the pre-index futures period. Finally, the results derived from the Granger causality test confirm that the bi-directional causality relation between the spot market volatility and the future trading activity exists in HOSE.

Efficient Price Discovery in the Bitcoin Markets

The findings of Wilshire Phoenix indicate that CME Bitcoin Futures contribute more to price discovery than its related spot markets. Our analysis was performed using similar methodology previously employed by the SEC’s Division of Economic and Risk Analysis to evaluate price formation. CME Bitcoin Futures have grown to become significant, this is not only demonstrated through trading volume and open interest, but also by influence on spot price formation. A leading futures market suggests the existence of a robust base of traders who may trade on such market for many reasons such as trust in the exchange venue and lower latency. Studies on price formation between the spot and futures markets in other asset classes often find that the futures markets lead.

Volatility Forecasting Based on Cyclical Two-Component Model: Evidence from Chinese Futures Markets and Sector Stocks

This article aims to study the schemes of forecasting the volatilities of Chinese futures markets and sector stocks. An improved method based on the cyclical two-component model (CTCM) introduced by Harris et al. in 2011 is provided. The performance of CTCM is compared with the benchmark model: Heterogeneous Autoregressive model of Realized Volatility type (HAR-RV type). The impact of open interest for futures market is included in HAR-RV type model. We employ 3 different evaluation rules to determine the most efficient models when the results of different evaluation rules are inconsistent. The empirical results show that CTCM is more accurate than HAR-RV type in both estimation and forecasting. The results also show that the realized range-based tripower volatility (RTV) is the most efficient estimator for both Chinese futures markets and sector stocks.

The Influence of Short Selling on the Production and Market Consequences of Negative Press Coverage

The production, dissemination and market consequences of firm-specific information are shaped by the incentives of market players operating within the constraints imposed by securities regulation. In this paper we focus on constraints to short selling activity and address two questions: Do short sale constraints influence (1) the extent to which the business press reports negative news stories?; and (2) the speed and intensity with which market participants respond to the publication of negative news reports? Following exogenous relief of short sale constraints, we find that treated firms’ press coverage tilts significantly more negative relative to untreated firms still facing higher constraints. This result is stronger for media-initiated articles than for firm-initiated press releases. With respect to market consequences we find that for treated firms, stock returns and open short interest become significantly more sensitive to negative news reports, and news sentiment-based trading strategies earn lower abnormal returns.

Affective field during collaborative problem posing and problem solving: a case study

Educators in mathematics have long been concerned about students’ motivation, anxiety, and other affective characteristics. Typically, research into affect focuses on one theoretical construct (e.g., emotion, motivation, beliefs, or interest). However, we introduce the term affective field to account for a person’s various affective factors (emotions, attitudes, etc.) in their intraplay. In a case study, we use data from an extracurricular, inquiry-oriented collaborative problem posing and problem solving (PP&PS) program, which took place as a 1-year project with four upper secondary school students in Sweden (aged 16–18). We investigated the affective field of one student, Anna, in its social and dynamic nature. The question addressed in this context is: In what ways does an affective field of a student engaging in PP&PS evolve, and what may be explanations for this evolvement? Anna’s affective field was dynamic over the course of the program. Her initial anxiety during the PP&PS program was rooted in her prior affective field about mathematics activities, but group collaboration, the feeling of safety and appreciation, together with an increased interest in within-solution PP and openness for trying new things went hand in hand with positive dynamics in her affective field.

PENDIDIKAN ISLAM SEBAGAI UPAYA MA’RIFATULLAH

Facing this modern era, ma'rifatullah is faced with increasingly complex life challenges. The reality of education also continues to experience severe moral degradation. The reason is one of them is due to the shifting of part of human thought from virtuous life orientation to the pursuit of hedonic and materialistic lifestyles. The purpose of this research is to uncover and analyze a synergistic approach that can revive human interest in opening and studying the values of ma'rifatullah and the space to apply them especially in Islamic education referring to the Koran and Hadith. The method to be used is the study of literature. The type of data used is secondary data with literature study data collection techniques. Based on the findings and analysis in this study, namely; firstly, ma'rifatullah is the main goal of developing all human potential, when a human manifests his spiritual power, then easily deliver it to ma'rifatullah. Second, the educational implications of this concept include the goals, roles, functions, principles, educators, students, material, methods and educational media. All of that must have a positive influence on the mind and heart in increasing all the potential possessed by humans. Thus, all the educational components are directed towards ma'rifatullāh.

The Financialization of Storable Commodities

I solve a dynamic equilibrium model of commodity spot and futures prices, incorporating an active futures market, heterogeneous risk-averse participants, and storage. When calibrated to data from the crude oil market, the model implies that financialization reduces the futures risk premium and increases correlation between futures open interest and the spot price level. However, there is no long-run increase in the mean spot price, and speculative storage generally attenuates financialization’s effect on spot price volatility. Therefore, financialization’s effect on spot price dynamics through storage arbitrage is likely modest, even if futures positions and risk premia are substantially altered.This paper was accepted by Gustavo Manso, finance.

Hedging positions in US wheat markets: a disaggregated data analysis

PurposeThis study aims to spot wheat data and disaggregated commitment of trader data for CME traded wheat futures to examine the effect of exogenous shocks for hedging positions of Producers and Swap Dealers on cash-futures basis and excess futures returns.Design/methodology/approachA Bayesian vector autoregression (BVAR) methodology is used to capture volatility transfer effects.FindingsEvidence is presented that institutional short hedging positions play a major role in the pricing of asymmetric information held by Swap Dealers into the basis. The results also indicate that producer hedging contains information when conditions in the supply chain create a shift in long vs short hedging demand. Finally, the results demonstrate that that Swap Dealer short hedging has the greatest effect on risk premium size and historical volatility.Originality/valueVarious proxies for spot prices are used in the literature, although actual spot price data is not common. In addition, stationarity for basis and open interest data is induced using the Baxter-King filter which allows us to work with levels, rather than percentage changes, in the time series data. This provides the ability to directly observe the effect of outright open interest positions for hedgers on contemporaneous innovations in basis and in excess returns. The use of a BVAR methodology represents an improvement over other structural VAR models by capturing contemporaneous systemic effects within an endogeneity based structural framework.