Expiration-Day Effects - An Asian Twist

A Study of Expiration-day Effects of Index Derivatives Trading in India

“…Bollen and Whaley 13 and Kan 14 showed no evidence of order imbalance or significant increase in trading activity, increased volatility, or price reversal on expiration days in Hong Kong. Chow, Yung, and Zhang 15 , for the same market, reported some evidence of return volatility but no effect on trading volume on expiration days in sharp disparity with Fung and Yung 16 who observed high trading volume and insignificant price effect. Corredor, Lechon, and Santamaria 17 with the Spanish data showed significant increase in the trading volume of the underlying asset, but no strong and systematic effect on the price and volatility of underlying asset on expiration days.…”

Expiration‐Day Effects and the Impact of Short Trading Breaks on Intraday Volatility: Evidence from the Indian Market

“…The Hong Kong market also uses Asian‐style settlement procedure, where the contracts are settled against the estimated average settlement price, which was the arithmetic average of the underlying cash index taken every 5 minutes on the expiration day. Fung and Yung () found that though the trading was higher on the expiration day and was concentrated around 5‐minute marks, there was no evidence of price reversal on the following day. They concluded that the use of “Asian‐style settlement procedure reduces the market pressure at contract expiration dates by spreading index‐related trades over a period of time.” Unlike Sweden and Hong Kong, where the unwinding pressure is possibly reduced by the use of prices over an extended time period on the expiration day, the LIFFE at London for FTSE 100 contracts and Paris for CAC‐40 contracts use an average price over a shorter time period but exclude the highest and lowest prices.…”

Price reversal as potential expiration day effect of stock and index futures: evidence from Warsaw Stock Exchange

“…Since then, research on expiration effects has been extended to other markets. As a result, the increased trading volume of underlying assets on the day of a derivative's expiration was detected on the markets of Japan (Karolyi [1996]), Germany (Schlag [1996]), Australia (Stoll and Whaley [1997]), Sweden (Alkebäck and Hagelin [2004]), Poland (Morawska [2007]), China (Fung and Jung [2009]), Spain (Illueca and Lafuente [2006]), and India (Narang and Vij [2013]), among others.…”