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Cojumping: Evidence from the US Treasury Bond and Future Markets (Discussion Paper 2010-06)

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Dungey, M and Hvozdyk, L (2010) Cojumping: Evidence from the US Treasury Bond and Future Markets (Discussion Paper 2010-06). Discussion Paper. School of Economics and Finance, University of Tasmania. (Unpublished)

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Abstract

The basis between spot and future prices will be affected by jump behavior in each asset price, challenging intraday hedging strategies. Using a formal cojumping test 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 presence of an anticipated macroeconomic news announcement, and particularly non-farm payrolls, increases the probability of observing cojumps. However, a negative surprise in non-farm payrolls, also increases the probability of the cojumping tests being unable to determine whether jumps in spots and futures occur contemporaneously, or alternatively that one market follows the other. On these occasions the market does not clearly signal its short term pricing behavior.

Item Type: Report (Discussion Paper)
Keywords: US Treasury markets, high frequency data, cojump test, repec
Publisher: School of Economics and Finance, University of Tasmania
Date Deposited: 29 Nov 2010 05:25
Last Modified: 18 Nov 2014 04:14
URI: http://eprints.utas.edu.au/id/eprint/10450
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