Price Discovery and Foreign Participation in the Republic of Korea’s Government Bond Cash and Futures Markets
Park, Cyn-Young; Mercado, Rogelio Jr.; Choi, Jaehun; Lim, Hosung | March 2015
Abstract
The authors assess the impact of foreign participation in Korean Treasury Bond (KTB) cash and futures
markets and their role in the price discovery process. Using daily data from the over-the-counter market
for cash and the Korea Exchange for futures transactions, the results show that foreign trading in the KTB
futures market leads the price discovery process for the underlying bonds. Specifically, foreigners’ daily net
long positions in the futures market exert significant influence in both KTB cash and futures prices. The
empirical findings also indicate that it is the unexpected component of foreign investors’ net long futures
positions that explains a significant share of the pricing effects.
Citation
Park, Cyn-Young; Mercado, Rogelio Jr.; Choi, Jaehun; Lim, Hosung. 2015. Price Discovery and Foreign Participation in the Republic of Korea’s Government Bond Cash and Futures Markets. © Asian Development Bank. http://hdl.handle.net/11540/3301. License: CC BY-NC-ND 3.0 IGO.ISSN
2313-6537
2313-6545 (electronic)
Citable URI
http://hdl.handle.net/11540/3301Metadata
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