Introducing the mini-futures contract on Ibex 35: implications for price discovery and volatility transmission

• Autores: Manuel Illueca Muñoz, Juan Ángel Lafuente Luengo
• Localización: Spanish economic review, ISSN 1435-5469, Vol. 10, Nº 3, 2008, págs. 197-219
• Idioma: inglés
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• Resumen

  • This paper analyzes the effects of the introduction of the mini-futures contract in the Spanish stock index futures market. The objective of the paper is twofold: (a) to analyze the potential destabilizing effect of the mini futures trading activity on the distribution of spot returns, and (b) to test whether the mini futures contract significantly contributes to the price discovery process. A non-parametric approach is used to estimate the density function of spot return conditional to both spot and futures trading volume. Empirical findings using 15-min intraday data reveal that the mini futures trading activity enhances the price discovery function of the derivative market and does not destabilize spot prices.