Expiration and maturity effect: empirical evidence from the Spanish spot and futures stock index

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The paper studies how the time remaining to the expiration date of derivative markets affects the volatility of the IBEX-35 index (expiration effect) and its futures market (maturity effect). The innovation of the study lies in both effects being studied together for the Spanish stock market using bivariate ECM-GARCH including dummy variables that express the time left to expiration day. The results obtained show that, during the week of the expiration day, the conditional variance of both markets increases without presenting any significant behaviour in the correlation level. During the second week, however, the conditional variance diminishes and the degree of correlation between both markets increases.

Document Type: Research Article

DOI: http://dx.doi.org/10.1080/00036840110111086

Publication date: September 10, 2002

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