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Cojumping: Evidence from the US Treasury bond and futures markets

journal contribution
posted on 2023-05-17, 14:05 authored by Dungey, M, Hvozdyk, L
The basis between spot and future prices will be affected by jump behavior in each asset price, challenging intraday hedging strategies. Using formal cojumping tests this paper considers the cojumping behavior of spot and futures prices in high frequency US Treasury data. Cojumping occurs most frequently at shorter maturities and higher sampling frequencies. We find that the probability of cojumping is altered by the presence of an anticipated macroeconomic news announcement. The probability of cojumping is particularly affected by news surprises in non-farm payrolls, CPI, GDP and retail sales. However, the two cojumping tests are also more likely to provide contradictory results in the presence of surprises in nonfarm payrolls. On these occasions the market does not clearly signal its short term pricing behavior.

History

Publication title

Journal of Banking and Finance

Volume

36

Issue

5

Pagination

1563-1575

ISSN

0378-4266

Department/School

TSBE

Publisher

Elsevier Science Bv

Place of publication

Po Box 211, Amsterdam, Netherlands, 1000 Ae

Rights statement

Copyright 2012 Elsevier B.V.

Repository Status

  • Restricted

Socio-economic Objectives

Monetary policy

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