Seybold Report ISSN: 1533-9211
Pranav Bansal
Research Scholar, Haryana School of Business, Guru Jambheshwar University of Science & Technology, Hisar
Dr. Usha Arora
Professor (Retd.), Haryana School of Business, Guru Jambheshwar University of Science & Technology, Hisar
Dr. Khujan Singh
Professor, Haryana School of Business, Guru Jambheshwar University of Science & Technology, Hisar
Vol 17, No 09 ( 2022 ) | DOI: 10.5281/zenodo.7113498 | Licensing: CC 4.0 | Pg no:1309-1322 | Published on: 26-09-2022
Abstract
A lot of new and complex derivative products were developed in the market during the past decades and a lot of concerns also emerged about their economic impacts. A general apprehension about these products is that they increase the volatility in the spot market. On one hand, many studies report a positive relationship whereas on the other hand almost equal number of studies report negative relationship. Not only this, some researchers also report mixed results or insignificant relationship. The main objective of the present paper is to do a comparative analysis of the structure of volatility during post derivative period. The impact of derivative trading on spot return and volatility has been studied through GARCH model. One significant limitation of the GARCH model is that it fails to take into account the crucial stylized fact called Asymmetric (leverage) effect. Hence, in the present study, the structure of volatility in Indian market is also tested using asymmetric models TGARCH and EGARCH. Followings are the equations of these asymmetric GARCH models.
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