| China launched the soybean meal option and the white sugar option in March and April 2017,which filled the blank of China's commodity options and has epochmaking significance for the construction of a perfect derivatives market.With the listing of soybean meal options and white sugar options,its function and role in the derivatives market has attracted close attention from investors.The simultaneous study of the price discovery function and the volatility spillover effect of the soybean meal option and the white sugar option can provide insights into the development and relative deficiencies of the two markets and provide a reference for the subsequent development of the market.The most common method for estimating the price discovery contribution is the IS model proposed by Hasbrouck(1995)and the CS model proposed by Gonzalo-Granger(1995).Putnin?(2013)based on the research of Yan and Zivot(2010),proposed a new indicator ILS model to measure the relative contribution of market price discovery.Patel et al.(2016)extended the ILS model and proposed the ILI model which is an approximate unbiased measure of the frequency at which the market leads the price discovery.As for volatility spillovers,Engle and Kroner(1995)proposed BEKK-GARCH model,which not only satisfies the positive deterministic requirements of the variance covariance matrix,but also reduces the estimation of parameters.It's an effective tool for studying the effects of volatility spillovers.Due to the late start of the domestic option market,research on domestic options is scarce.Investors can't keep abreast of the performance of the newly listed commodity options in the market and their volatility spillovers with the underlying market.In view of this,this paper uses ILS model and ILI model to estimate the price contribution of soybean meal and sugar options markets,and establishes BEKK-GARCH model to analyze the volatility spillover between options and futures markets.The main conclusions of this paper are as follows:(1)There is a significant two-way Granger causality between the options and futures makets,however,soybean meal futures are more powerful in explaining the future changes of soybean meal options.(2)The average price contribution of the soybean meal option market is 67.52%,and the average price discovery frequency is 72.44%,indicating that the price discovery is dominated by the soybean meal option market.(3)The average price contribution of the sugar option market is 47.4%,and the average price discovery frequency is 47.5%,indicating that the price discovery is dominated by white sugar futures,but the sugar option also played a major role in price discovery.(4)There is a significant two-way volatility spillover effect between the soybean meal option and the soybean meal futures market.(5)The white sugar market has the same volatility spillover effect as soybean meal market does,but the volatility spillover effect of the white sugar option market is stronger than the white sugar futures market.(6)The price contribution of the soybean meal option is larger,which indicates that the development of the soybean meal option market is more perfect,and the white sugar option market needs further development.The innovations of this paper are as follow: First,we select the latest soybean meal option and white sugar option as the research object,which not only allows investors to understand the Chinese derivatives market,but also can make up for the vacancies related to the domestic option market.Second,we select ILS and ILI models to quantitatively measure the price contribution of each market,which can get more accurate results.Third,we select 1 minute of high-frequency data for research which not only satisfies the financial market's demand for information timeliness,but also keeps the data information well.There are still some shortcomings,as we only analyzed the relationship between the options and futures markets and didn't conducte time-varying studies on price analysis and volatility spillover effects. |
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