Factors behind exchange-traded derivatives products success
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Abstract
This paper empirically analyzes factors behind successful derivatives products in the emerging markets of the Asian region. Successful derivatives products are defined as contracts with high trade volume. The influencing factors are the size of the underlying spot market, the spot market volatility, the spot market liquidity, whether the derivatives product was the first contract introduced in the derivatives exchange, and whether the product was options or futures. We find that the size of the underlying spot market, the spot market volatility and the spot market liquidity have statistically significantly positive effect on the trading volume of the derivatives products. Moreover, if the derivatives product was the first derivatives product introduced in the exchange, it is more likely to be successful. Option contracts are relatively more successful than their respective futures contracts in terms of trading volume, which could be due to the costs associated with margin requirements.
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This paper empirically analyzes factors behind successful derivatives products in the emerging markets of the Asian region. Successful derivatives products are defined as contracts with high trade volume. The influencing factors are the size of the underlying spot market, the spot market volatility, the spot market liquidity, whether the derivatives product was the first contract introduced in the derivatives exchange, and whether the product was options or futures. We find that the size of the underlying spot market, the spot market volatility and the spot market liquidity have statistically significantly positive effect on the trading volume of the derivatives products. Moreover, if the derivatives product was the first derivatives product introduced in the exchange, it is more likely to be successful. Option contracts are relatively more successful than their respective futures contracts in terms of trading volume, which could be due to the costs associated with margin requirements.
This paper empirically analyzes factors behind successful derivatives products in the emerging markets of the Asian region. Successful derivatives products are defined as contracts with high trade volume. The influencing factors are the size of the underlying spot market, the spot market volatility, the spot market liquidity, whether the derivatives product was the first contract introduced in the derivatives exchange, and whether the product was options or futures. We find that the size of the underlying spot market, the spot market volatility and the spot market liquidity have statistically significantly positive effect on the trading volume of the derivatives products. Moreover, if the derivatives product was the first derivatives product introduced in the exchange, it is more likely to be successful. Option contracts are relatively more successful than their respective futures contracts in terms of trading volume, which could be due to the costs associated with margin requirements.
Keywords
Derivatives Products, Spot Market Size, Spot Market Volatility, Spot Market Liquidity