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Maturity effects in the Mexican interest rate futures market

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  • Pedro Gurrola
  • Renata Herrerías

Abstract

This study investigates the relationship between volatility and contract expiration for the case of Mexican interest rate futures. Specifically, it examines the hypothesis that the volatility of futures prices should increase as contracts approach expiration (the “maturity effect”). Using panel data techniques, the study assesses the differences in volatility patterns between contracts. The results show that although the maturity effect was sometimes present, the inverse effect prevails; volatility decreases as expiration approaches. On the basis of the premises of the negative covariance hypothesis, the study provides additional criteria that explain this behavior in terms of the term structure dynamics. © 2010 Wiley Periodicals, Inc. Jrl Fut Mark 31:371–393, 2011

Suggested Citation

  • Pedro Gurrola & Renata Herrerías, 2011. "Maturity effects in the Mexican interest rate futures market," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 31(4), pages 371-393, April.
    • Handle: RePEc:wly:jfutmk:v:31:y:2011:i:4:p:371-393
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    Cited by:

    1. Robert Brooks & Pavel Teterin, 2020. "Samuelson hypothesis, arbitrage activity, and futures term premiums," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 40(9), pages 1420-1441, September.
    2. Liu, Wei-han, 2016. "A re-examination of maturity effect of energy futures price from the perspective of stochastic volatility," Energy Economics, Elsevier, vol. 56(C), pages 351-362.
    3. Atilgan, Yigit & Demirtas, K. Ozgur & Simsek, Koray D., 2016. "Derivative markets in emerging economies: A survey," International Review of Economics & Finance, Elsevier, vol. 42(C), pages 88-102.
    4. Sun, Zesheng & Wang, Yaoqing & Zhou, Xu & Yang, Lunan, 2019. "The roundabout from interest rates to commodity prices in China: The role of money flow," Resources Policy, Elsevier, vol. 61(C), pages 627-642.
    5. Sanjay Sehgal & Tarunika Jain Agrawal, 2019. "Impact of Commodity Transaction Tax on Market Liquidity, Volatility, and Government Revenues: An Empirical Study for India," Vikalpa: The Journal for Decision Makers, , vol. 44(1), pages 12-29, March.
    6. Xu, Kewei & Xiong, Xiong & Li, Xiao, 2021. "The maturity effect of stock index futures: Speculation or carry arbitrage?," Research in International Business and Finance, Elsevier, vol. 58(C).
    7. Phan, Hoàng-Long & Zurbruegg, Ralf & Brockman, Paul & Yu, Chia-Feng (Jeffrey), 2022. "Time-to-maturity and commodity futures return volatility: The role of time-varying asymmetric information," Journal of Commodity Markets, Elsevier, vol. 26(C).

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