Relation Between Open Interest and Volatility in Futures Markets

This paper emphasizes on investigation of the relation of the open interest for the Nifty Index futures. The purpose of this paper is to examine the consequence of open interest on volatility of futures markets. An effort was made to capture the size and change in speculative behavior in futures markets by examining the role of open interest in the behavior of futures prices. The findings show that depth of the market has an effect on the futures market’s volatility but the direction of this effect depends on the type of contract