Resilience of Indian Equity Versus Derivatives Markets : An Analysis Using VaR Approach

This paper examines the resilience displayed by the spot indices S&P CNX Nifty, and two sectoral indices - CNX IT and Bank Nifty - of National Stock Exchange (NSE), one of the major stock exchanges in India, versus their respective futures contracts using Value-at-Risk (VaR) concept during dotcom and subprime mortgage crises over 2000-10 period. The study finds that losses based on one-day VaR at 95% confidence interval have been greater in the futures market than in their respective underlying spot markets, thereby implying that Indian derivatives market displays less resilience than its equity market