Modelling the Time-varying Volatility of Indian Spot Market and the Underlying Futures Market

Sanjeeta Shirodkar, Guntur Anjana Raju and Shripad Marathe

In recent time Derivatives products like Option and Futures serves as a vital instrument of risk hedging, price discovery, portfolio diversification and price stabilisation. Several researchers have explored the association among the Spot Market and the Futures Market. GARCH family models are applied to investigate the time-varying volatility of Spot Market and the underlying Futures market in India. The outcome of the GARCH analysis signifies that old announcement has a higher effect on today's price changes'. GARCH model supports the existence of asymmetry in the volatility. The result also presents evidence that time-varying volatility is highly persistent and asymmetric in nature for Cash as well as the Futures market.

Volume 12 | 04-Special Issue

Pages: 1738-1745

DOI: 10.5373/JARDCS/V12SP4/20201656