The effect of new futures contracts on gold futures price volatility : evidence from the Thailand futures exchange

Woradee Jongadsayakul

This paper studies the effect of new gold derivatives products, including Gold-D and Gold Online Futures, on the futures price volatility of existing gold futures with two contract sizes, 50 baht-weight and 10 baht-weight, using symmetric and asymmetric GARCH family models, namely: GARCH (1,1), TARCH (1,1), and EGARCH (1,1) models. The results reveal the existence of leverage effect in TARCH (1,1) and EGARCH (1,1) models. Moreover, TARCH (1,1) is found as the best fitting model in modelling gold futures price volatility. The results confirm that the coming into market of Gold-D significantly reduces the price volatility of existing gold futures. There is not a significant negative relationship between the introduction of Gold Online Futures and the existing gold futures price volatility. Therefore, the results suggest regulatory authority to lower the level of margin requirements for the related futures contracts, along with the issuance of new derivatives products.

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Year of publication:	2020
Authors:	Woradee Jongadsayakul
Published in:	Cogent economics & finance. - Abingdon : Taylor & Francis, ISSN 2332-2039, ZDB-ID 2773198-4. - Vol. 8.2020, 1, Art.-No. 1802807, p. 1-14
Subject:	GARCH family \| gold futures \| new contract \| volatility \| Volatilität \| Volatility \| Gold \| Warenbörse \| Commodity exchange \| Derivat \| Derivative \| Thailand \| Rohstoffderivat \| Commodity derivative \| ARCH-Modell \| ARCH model \| Futures \| Index-Futures \| Index futures