This work was supported by Hankuk University of Foreign Studies Research Fund of 2013. We are grateful to Hee-Joon Ahn, Robert Webb (the editor) and an anonymous referee for many constructive comments and suggestions. Any remaining errors are our responsibility.
Can the Indicative Price System Mitigate Expiration-Day Effects?
Article first published online: 13 JUL 2012
© 2012 Wiley Periodicals, Inc.
Journal of Futures Markets
Volume 33, Issue 10, pages 891–910, October 2013
How to Cite
Chay, J.B., Kim, S. and Ryu, H.-S. (2013), Can the Indicative Price System Mitigate Expiration-Day Effects?. J. Fut. Mark., 33: 891–910. doi: 10.1002/fut.21574
- Issue published online: 18 JUL 2013
- Article first published online: 13 JUL 2012
- Manuscript Accepted: 5 JUN 2012
- Manuscript Received: 6 SEP 2011
- Hankuk University of Foreign Studies Research Fund
We investigate whether the indicative price system, introduced in the Korean derivatives market on July 1, 2003, has helped mitigate the options and futures expiration-day effects. Prior to introduction of this system, we find evidence of high trading volume and significant price reversals during the first half hour of trading for the day immediately following the expiration day. These effects decline significantly after July 1, 2003. Our evidence suggests that the indicative price system can mitigate the expiration-day effects.