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Relationship between share index volatility, basis and open interest in futures contracts : the South African experienceMotladiile, Bopelokgale 04 1900 (has links)
Study project (MBA)--University of Stellenbosch, 2003. / ENGLISH ABSTRACT: In a rational efficiently functioning market, the price of the share index and share
index futures contracts should be perfectly contemporaneously correlated. According
to the cost of carry model, the futures price should equal its fair value at maturity.
The basis should be equal to the cost of carry throughout the duration of the futures
contract.
However, in practice the cost of carry model is obscured and the basis varies and is
normally not equal to the cost of carry. Reasons for this variability in basis include
the mark-to-market requirement of the futures contract, the differential tax treatment
of spot and futures contracts, as well as the transaction cost of entering into a
contract. Transaction costs are lower for futures contracts than for spot contracts.
This study uses the Chen, Cuny and Haugen (1995) model to examine the
relationship between the basis and volatility of the underlying index and between the
open interest of the futures contract and the volatility of the underlying index. Chen
et al. (1995) predicted that the basis is negatively related to the volatility of the
underlying index and that the open interest is positively related to the volatility of the
underlying index. The study will also test the statement by Helmer and Longstaff
(1991) that the basis has a negative concave relationship with the level of interest
rate. The tests were performed on data from ALSI, FINI and INDI futures contracts.
The sample period was from January 1998 to December 2001.
The results correspond to those obtained by Chen et al. (1995) in that the basis is
negatively related to the volatility of the underlying index. This is true for all the three
indices. The other main prediction of the Chen, Cuny and Haugen (CCH) model
(1995), which is also supported by the study, is that open interest is significantly
related to the volatility of the underlying index. The study also supports the
statement by Helmer and Longstaff (1991) that the there is a highly significant
negative concave relationship between the basis and interest rate. / AFRIKAANSE OPSOMMING: In "n mark wat rasioneel funksioneer, behoort die prys van die aandele-indeks en
aandele-indekstermynkontrakte perfek gekorreleer te wees in tyd. Volgens die
drakostemodel behoort die termynkontrakprys op die vervaldatum gelyk te wees aan
die billike waarde daarvan. Die basis behoort vir die looptyd van die termynkontrak
gelyk te wees aan die drakoste.
In die praktyk word die drakostemodel egter vertroebel en wissel die basis en is dit
gewoonlik nie gelyk aan die drakoste nie. Redes vir hierdie veranderlikheid van die
basis sluit in die waardasie teenoor markprys van die termynkontrak, die belasting
van toepassing op loko- en termynkontrakte, asook die transaksiekoste by die
aangaan van "n kontrak. transaksiekoste vir termynkontrakte is laer as vir
lokokontrakte.
Hierdie studie gebruik die model van Chen, Cuny en Haugen (1995) om die
verwantskap tussen die basis en die volatiliteit van die onderliggende indeks en
tussen die oop kontrakte van die termynkontrak en die volatiliteit van die
onderliggende indeks te ondersoek. Chen et al. (1995) voer aan dat daar 'n
negatiewe verwantskap is tussen die basis en die volatiliteit van die onderliggende
indeks en dat daar "n positiewe verwantskap is tussen die oop rente en die volatiliteit
van die onderliggende indeks. Die studie toets ook Helmer en Longstaff (1991) se
hipotese dat daar 'n negatiewe, konkawe verhouding tussen die basis en die
rentekoersvlak bestaan. Die toetse is uitgevoer op data van ALSI-, FINI- EN INDItermynkontrakte.
Die steekproef was van Januarie 1998 tot Desember 2001.
Die resultate stem ooreen met dié van Chen, Cuny en Haugen (1995) se model
(CCH-model) in dié opsig dat daar "n negatiewe verband is tussen die basis en die
volatiliteit van die onderliggende indeks. Dit geld vir al drie die indekse. Die ander
hoofresultate van Chen et al. (1995), wat ook deur die studie ondersteun word, is dat
daar "n beduidende verband tussen die oop kontrakte en die volatiliteit van die
onderliggende indeks bestaan. Die studie ondersteun ook Helmer en Longstaff(1991) se siening dat daar 'n beduidende, negatiewe, konkawe verhouding tussen
die basis en die rentekoers bestaan.
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Die regulering van termynkontrakte in Suid-AfrikaAckroyd, Riana 29 August 2012 (has links)
LL.M. / Die doel van hierdie verhandeling is om die reguleringsisteem in Suid-Afrika te beskryf soos wat dit betrekking het op termynkontrakte. Termynkontrakte vorm deel van 'n groep finansiele instrumente algemeen bekend as afgeleide instrumente. Die term 'afgeleide instrumente' is 'n generiese begrip wat gebruik word om verskeie finansiele instrumente te beskryf wie se waarde afgelei word van 'n onderliggende kommoditeit, wisselkoers of indeks. Termynkontrakte word op die Suid-Afrikaanse termynbeurs (SATEB) verhandel. Ter inleiding sal die sleutelaspekte rondom termynkontrakte en termynhandel kortliks bespreek word ten einde die leser 'n oorsig te bied. Die aspekte word egter in die loop van die verhandeling, onder die toepaslike hoofstukke, meer volledige verduidelik.
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Interaction between macroeconomic fundamentals and energy prices: evidence from South AfricaDiale, Tumelo K January 2017 (has links)
This write-up is submitted in partial fulfilment of the Master of Management Degree in Finance and Investments Degree. / Growth in commodity exporting economies, such as South Africa, is highly dependent on the revenue generated from exports. It is thus evident that as commodity prices fluctuate, income and the balance of payments will be accordingly impacted. This is further exacerbated by strong dependence on the imports of certain commodities. Oil is one such commodity on whose imports South Africa is highly dependent. Although natural gas is also imported, it is in lower quantities and is as such expected to impact South Africa to a lower extent. Coal, on the other hand, is among the main commodity exports and was expected to have an impact on (and be impacted by) South African macroeconomic fundamentals.
In this study, we use a VECM and MGARCH model to test the interaction between South African macroeconomic variables and these three commodities. Our VECM findings indicate that oil and exchange rates are inflationary. This implies that an increase in oil prices and/or exchange rates (indicating a depreciation of the Rand against the U.S. Dollar) results in an increase in inflation. Inflation, on the other hand, propagates higher coal prices and to a lesser extent, higher interest rates. We account the latter to South Africa’s inflation targeting regime and the former to demand and supply dynamics which occur at RBCT as production costs increase (short-term coal export contracts and spot market sales). Natural gas is found to have weak impacts on interest rates and exchange rates. Our MGARCH model shows that only the innovations in natural gas and oil prices spillover into interest rates and exchange rate. There is no direct spillover captured. However, there is strong direct spillover from oil to inflation. Lastly, interest rates are found to have a strong direct volatility spillover to both oil and natural gas. We attribute this to the exchange rate impact that interest rates have and is supported by the exchange rate impact on commodity price volatility. We conclude that an in-depth understanding of triggers is pertinent for monetary and fiscal policy decisions in South Africa. Although the South African economy is relatively diversified compared to other developing countries, commodity price fluctuations do have a significant impact on economic performance. / MT2017
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The relationship between futures prices and expected future spot prices : some South African evidenceKeyser, Johannes de Kock 12 1900 (has links)
Thesis (MBA)--Stellenbosch University, 2002. / ENGLISH ABSTRACT: A unique data set consisting of economists' expectations on key economic indicators
was examined within the context of the controversial normal backwardation theory of
Keynes. The economists' expectations were regarded as the expected future spot
price and the relationship between them and the corresponding futures contracts was
analysed. The respective economic indicators were: i) the yield from aparastatal
Bond, ii) the yield from Government Bonds, iii) the rate of the 90 day Banker's
Acceptance (BA) Deposit Rate and iv) the Rand/Dollar (R/$) Exchange Rate for the
past seven years, i.e. 1995 to 2001. The accuracy of the economists' predictions
was tested both on a visual basis and the relationship between the expected values
and the futures prices was plotted in a graphical format. A nonparametric statistical
procedure was used to determine whether the economists' expectations were of any
value. To put it differently, the question being posed is: do these economists, as a
group, possess some superior forecasting skills?
Two different conclusions were reached from the analysis:
First conclusion: by accepting the normal backwardation theory, it implies that the
contango theory also holds. Therefore, when analysing the data set visually -
depending on which theory it supports - the futures price must trade consistently
below or above the expected future spot price. For this particular analysis the yield of
the bond, and not its price, was the important factor. In most cases the plotted
relationships between the expected values and the futures prices were found to
support the contango theory and, to a lesser extent, the normal backwardation
theory. Hence, speculators were, in order to make profits, predominately sellers of
futures contracts.
Second conclusion: the strongest conclusion, however, follows from the statistical
tests conducted on the expected values. It was found that economists do possess
some superior forecasting skills and if they had used their predictions and had taken
the corresponding market positions, they would have been consistent winners in the
futures market. Their reward would be mainly for their ability to forecast eventual
spot prices and, to a lesser extent, for their risk bearing. It was impossible to link the two conclusions to confirm the normal backwardation theory, for the particular South
African data set. The evidence is thus consistent with the hypothesis that the futures
price is an unbiased estimate of the expected future spot price. / AFRIKAANSE OPSOMMING: 'n Unieke datastel, bestaande uit ekonome se vooruitsigte van kern ekonomiese
aanwysers, is ondersoek binne die konteks van die omstrede normale
terugwaardasie-teorie (d.i. "normal backwardation theory") van Keynes. Die
ekonome se vooruitsigte is aanvaar as die verwagte toekomstige kontantprys en die
verhouding hiertussen en die ooreenstemmende termynpryse is ontleed. Die
onderskeie ekonomiese aanwysers was: i) die opbrengs op 'n Semi-Staatseffek,
ii) die opbrengs op Staatseffekte, iii) die koers van die negentig-dae-Bankaksepte
(BA) Depositokoers en iv) die Rand/Dollar (R/$) Wisselkoers oor die afgelope sewe
jaar, d.w.s. 1995 tot 2001. Die akkuraatheid van die ekonome se vooruitskattings is
op 'n visuele basis vergelyk, en die verhouding tussen die verwagte prys en die
termynpryse is in grafiese formaat gekarteer. 'n Nie-parametriese statistiese
prosedure is gebruik om vas te stel of hierdie ekonome se vooruitsigte van enige
waarde was. Anders gestel, die vraag is: beskik hierdie ekonome as 'n groep oor
sekere superieure vooruitskattingsvaardighede?
Die volgende twee afsonderlike gevolgtrekkings is geformuleer:
Eerste gevolgtrekking: deur die normale terugwaardasie-teorie te aanvaar, impliseer
dit dat die contango-teorie (d.i, "contango theory") ook geldig is. Dus, wanneer die
datastel visueel getoets word - afhangende van watter teorie dit ondersteun - moet
die termynprys konsekwent bo of onder die verwagte toekomstige kontantprys
verhandel. Vir hierdie bepaalde analise was die opbrengs van die staatseffek die
belangrike faktor en nié die prys daarvan nie. In die meeste gevalle het die
gekarteerde verhouding tussen die verwagte prys en die termynprys getoon dat dit
die contango-teorie ondersteun het en, in 'n mindere mate, die normale
terugwaardasie-teorie. Derhalwe was spekulante, ten einde wins te maak,
oorwegend die verkopers van termynkontrakte.
Tweede gevolgtrekking: die belangrikste gevolgtrekking volg egter uit die statistiese
toetse wat uitgevoer is op die verwagte pryse. Daar is bevind dat ekonome wel oor
superieure vooruitskattingsvaardighede beskik en dat, indien hulle hul
vooruitskattings gebruik en die ooreenstemmende markposisies ingeneem het, hulle konsekwent wenners in die termynmark sou gewees het. Hulle vergoedings sou
hoofsaaklik gewees het vir hulle vermoë om uiteindelike kontantpryse te voorspel en,
in 'n mindere mate, vir hulle risiko-blootstelling. Dit was onmoontlik om hierdie twee
vergelykings met mekaar te verbind om sodoende die normale terugwaardasie-teorie
te onderskryf vir die betrokke Suid-Afrikaanse datastel. Die bewyslewering is dus
konsekwent met die hipotese dat die termynprys 'n onsydige skatting van die
verwagte toekomstige kontantprys is.
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The exchange rate as an absorber of commodity price volatility on stock returns of commodity producing firmsNgwenya, Simosini Choice January 2017 (has links)
Thesis (M.M. (Finance & Investment)--University of the Witwatersrand, Faculty of Commerce, Law and Management, Wits Business School, 2017 / This paper provides an empirical analysis of the effect of commodity price volatility on the volatility of the South African exchange rate and subsequently the returns on the equity of commodity producing firms listed on the JSE. GARCH and VAR models evaluate South African exchange rate and stock market data between the years 1995 and 2015. Results show that there exists a spill over and bidirectional relationships between the equity returns volatility and the volatility of the exchange rate. Findings also indicated that international commodity price shocks transmitted into the South African Rand. / MT2017
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An analysis of the Samuelson hypothesis in South AfricaHaarburger, Terri January 2016 (has links)
A research report submitted in partial fulfilment of the requirements for the degree
M.Com. Masters (Finance)
in the
School of Economic and Business Sciences
at the
University of the Witwatersrand, Johannesburg / This study empirically investigates the existence of the Samuelson Hypothesis in South African markets. The Samuelson Hypothesis states that the volatility of futures contracts increase as the expiration of the contracts approaches. It is an important phenomenon to account for when setting margins, creating hedging strategies and valuing options on futures. The study utilizes daily closing prices of agricultural and non-agricultural futures contracts for a period varying from 2002 to 2015. In total, eleven contracts were examined over this period, yet only one (White Maize) consistently shows support for the Samuelson Hypothesis. The Negative Covariance and State Variable Hypothesis were tested, but could not provide an alternative explanation for the lack of relationship between the time to maturity and volatility of futures contracts. / MT2017
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The impact of single stock futures on the South African equity marketDe Beer, Johannes Scheepers 30 November 2008 (has links)
Text in English with summaries in English and Afrikaans / The introduction of single stock futures to a market presents the opportunity to assess an individual
company's response to futures trading directly, in contrast to the market-wide impact obtained
from index futures studies. Thirty-eight South African companies were evaluated in terms of a
possible price, volume, and volatility effect due to the initial trading of their respective single
stock futures contracts. An event study revealed that SSF trading had little impact on the
underlying share prices. A normalised volume comparison pre to post SSF trading showed a
general increase in spot market trading volumes. The volatility effect was the main focus of this
study with a GARCH(1,1) model establishing a volatility structure (pattern of behaviour) per
company. Results showed a reduction in the level and changes in the structure of spot market
volatility. In addition, a dummy variable regression could find no evidence of an altered
company-market relationship (systematic risk) post futures. / Business Management / M.Com. (Business Management)
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The impact of single stock futures on the South African equity marketDe Beer, Johannes Scheepers 30 November 2008 (has links)
Text in English with summaries in English and Afrikaans / The introduction of single stock futures to a market presents the opportunity to assess an individual
company's response to futures trading directly, in contrast to the market-wide impact obtained
from index futures studies. Thirty-eight South African companies were evaluated in terms of a
possible price, volume, and volatility effect due to the initial trading of their respective single
stock futures contracts. An event study revealed that SSF trading had little impact on the
underlying share prices. A normalised volume comparison pre to post SSF trading showed a
general increase in spot market trading volumes. The volatility effect was the main focus of this
study with a GARCH(1,1) model establishing a volatility structure (pattern of behaviour) per
company. Results showed a reduction in the level and changes in the structure of spot market
volatility. In addition, a dummy variable regression could find no evidence of an altered
company-market relationship (systematic risk) post futures. / Business Management / M.Com. (Business Management)
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Return volatility causal inferences on the commodity derivatives marketsMotengwe, Chrisbanard January 2016 (has links)
Dissertation Submitted in Partial Fulfillment of the Requirements for the Degree of Doctor of Philosophy in Management
Graduate School of Business Administration
University of the Witwatersrand
April 2016 / This thesis examined commodity futures on the South African Futures Exchange (SAFEX) from two angles; the investors’ perspective and that of the futures exchange. For the former, the research looked at market inefficiencies and resultant arbitrage opportunities while for the latter, extraordinary market movements are examined by exploring how extreme value analysis (EVA) is ideal for exchange risk management and maintaining market integrity. This broadly leads to four empirical contributions to the literature on commodity futures.
Using a variety of time series models, wheat contract anomalies are identified by developing new trading rules whose outcomes are superior to any approach based on chance. Monte Carlo simulation employed in an out-of-sample period after accounting for transaction costs establishes that the trading rules are financially profitable. An examination of information flows across four major markets indicated that the Zhengzhou Commodity Exchange (ZCE) is the most endogenous market, Euronext and the London International Financial Futures Exchange (LIFFE) the most exogenous, while Kansas City Board of Trade (KCBT) is the most influential and sensitive wheat market. SAFEX is a significant receiver of information but does not impact the other markets. Another contribution, analysing maturity effects by incorporating traded volume, change in open interest, and the bid-ask spread while accounting for multicollinearity and seasonality indicates that only wheat supports the so called maturity effect. Lastly, asymmetry is found in long and short positions in SAFEX contracts, and using extreme value theory (EVT) in margin optimization, evidence is found that price limits significantly impact large contract returns.
Several implications arise from these results. SAFEX wheat contract inefficiencies could be attractive to speculators. Wheat margins should be higher nearer maturity. Optimizing margins using EVT could reduce trading costs, increase market attractiveness and liquidity while enhancing price discovery. South Africa should increase wheat production since reducing imports will lower vulnerability to adverse price transmission.
JEL Classification: C13, C14, C58, G01, G13, G17
Keywords: Futures market; commodities; volatility; seasonality; information flows, margins / MB2016
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The impact of oil price changes on selected economic indicators in South AfricaVellem, Nomtha January 2014 (has links)
The study examines the effect of oil price changes on selected economic indicators in South Africa. A VAR-5 model was applied to quarterly data of 1990:Q1-2012:Q4 estimating the impulse response functions, variance decomposition and Granger-causality tests. The findings allow for a conclusion that oil significantly affects the exchange rate and an inverse link between oil and GDP exists. A unidirectional relation is found where oil Granger-causes the exchange rate and GDP Granger-causes oil in South Africa.
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