THE IMPACT OF DERIVATIVES ON THE VOLATILITY OF TURKISH STOCK MARKET

Year 2018, 17. UIK Special Issue, 857 - 868, 04.07.2018

Aysegul Cımen

https://doi.org/10.18092/ulikidince.430301

Cited By: 1

Abstract

The interaction among futures and spot markets has been one of the most
important issues of the financial markets since the launch of stock index
futures by Kansas City Board of Trade in 1982. The main characteristics of
derivatives such as having lower transaction costs, higher leverage, higher
liquidity and higher flexibility compared to spot markets make them attractive
for investors. Besides, derivatives trading are crucial for financial system
participants in order to diversify portfolio and minimise risks. The aim of
this paper is to emphasize the importance of derivative securities by providing
evidence from an emerging stock market, Turkey. In order to emphasize the need
for derivatives in the Turkish market, the impact of introduction of index
futures and index options trading on the underlying spot market volatility are
empirically analysed. Conditional and unconditional volatility of Borsa
Istanbul 30 Index is examined using GARCH model starting from its first trade
day of January 2, 1997. 

Keywords

: derivatives trading, conditional volatility

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