Price Discovery and Foreign Participation in the Republic of Korea's Government Bond Cash and Futures Markets

Arbeitspapier

This paper examines the impact of foreign participation in Korean Treasury Bond (KTB) futures and its role in price discovery for KTBs, using daily transactions data from the over-the-counter market for KTBs and from the Korea Exchange for the futures. Our analysis suggests that foreign trading in the KTB futures market leads the price discovery process for the underlying bonds. Empirical results show that foreigners' daily net long positions in the futures market exert significant influence in KTB and KTB futures prices. We also find that it is the unexpected component of foreign investors' net long futures positions that explains a significant share of the pricing effects, suggesting that how foreign trading responds to news carries additional information content.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ADB Economics Working Paper Series ; No. 427

Classification and Topics

• Classification: Wirtschaft ; General Financial Markets: General (includes Measurement and Data) ; Contingent Pricing; Futures Pricing; option pricing ; Information and Market Efficiency; Event Studies; Insider Trading
• Subject: price discovery ; emerging market bonds ; foreign participation

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Park, Cyn-Young ; Mercado, Rogelio ; Choi, Jaehun ; Lim, Hosung
• Event: Veröffentlichung
• (who): Asian Development Bank (ADB)
• (where): Manila
• (when): 2015

Further information

• Handle: http://hdl.handle.net/10419/109509
• Last update: 10.03.2025, 11:45 AM CET