Information Transmission across Eurodollar Futures Markets

• Main Authors: Lim, Kian Guan, Terry, Eric, How, Desmond
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 1998
• Subjects: Business; Finance and Financial Management
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/2264; https://doi.org/10.1142/S0219024998000138
• Institution: Singapore Management University

Identical contracts traded at two distinct time zones but linked with a mutual offset system allow for round-the-clock trading. It is interesting to investigate the characteristics of information transmission in such a market. In this paper we employ GARCH specifications to model Eurodollar futures interest rate changes in IMM and in SIMEX. We employ the Causality-in-Variance test based on cross-correlation function to test hypotheses on the lead-lag relationships of volatilities between IMM and SIMEX. There is strong evidence of information transmission from IMM to SIMEX, and not vice-versa. However, during the 86 December till 88 September period, including contracts during the October 87 crash, there is evidence of causality also running from SIMEX to IMM.