Impact of night trading sessions on volatility of USD futures market in Thailand
Vol. 17, No 1, 2024
Woradee Jongadsayakul
Department of Economics, Kasetsart University, Thailand fecowdj@ku.ac.th ORCID 0000-0002-9807-2138 |
Impact of night trading sessions on volatility of USD futures market in Thailand |
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Abstract. Prior to September 2021, USD Futures could only be traded during the regular hours in Thailand Futures Exchange (TFEX). An additional trading session at night, while trading in both London and New York exchanges is active, enables investors to better handle their foreign exchange exposure or speculative needs of the moment. However, understanding volatility behavior is crucial for achieving successful trading. Therefore, this study investigates the impact of night trading sessions on the USD Futures volatility using GARCH family models. The USD Futures market volatility is examined through comparative analysis before and after the introduction of the night trading session. Both TARCH and EGARCH models have revealed no existence of leverage effect over the sample period - from January 2, 2020 to December 30, 2022. The GARCH model has proved to be the most accurate model for describing USD Futures volatility. Following the launch of nighttime trading, USD Futures market has experienced higher and more persistent volatility. In response to an increase in the volatility of USD Futures, TFEX should increase its margin requirement and monitor the speculative movements in futures market for their possible destabilizing effect. Investors should also adjust their hedge ratio to manage risk more appropriately and incorporate an extended period of increased uncertainty into their trading strategies. |
Received: May, 2023 1st Revision: February, 2024 Accepted: March, 2024 |
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DOI: 10.14254/2071-8330.2024/17-1/1
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JEL Classification: G15, G23, G32, M21 |
Keywords: Thailand’s foreign exchange futures, futures price volatility, GARCH family models, trading hours |