Due to increased linkages between the spot and the derivatives markets, one might expect that expiry dates in derivatives markets could cause price-volatility and traded-quantity to increase for underlying securities in the spot markets. If such increments are indeed noticed, and if expiry date is the single most important cause for such movements, one would further expect the price-volatility and traded quantity for the underlying stocks to come down the very next day. This paper tests the effect of expiry date on the price-volatility and traded quantity of one hundred underlying securities that formed the most traded derivative contracts on individual securities on the National Stock Exchange (NSE) of India. The study found that the price volatility did not increase significantly on expiry date or decrease the day after, while the traded quantity indeed increased on the expiry dates and decreased significantly the day after.
|Journal||Journal of International Business and Economics|
|Publisher||International Academy of Business and Economics|