Table of Contents
ISRN Economics
Volume 2013, Article ID 718538, 6 pages
Research Article

Long-Term Effects of Expiration of Derivatives on Indian Spot Volatility

1Acharya Narendra Dev College, University of Delhi, Delhi 110019, India
2Faculty of Management, University of Delhi, Delhi 110007, India

Received 16 June 2013; Accepted 16 July 2013

Academic Editors: M. T. Leung, S. Managi, and K. P. Upadhyaya

Copyright © 2013 Sunita Narang and Madhu Vij. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.


This paper examines the impact of expiration of derivatives on spot volatility of Indian capital market. The review of the literature shows that the previous Indian studies have covered a period of only 4–6 years after the introduction of derivative trading in India in 2000. They are unanimous about volume effect but not about return and volatility effect. This paper uses regression techniques and one symmetric and three asymmetric GARCH models, namely, TGARCH, EGARCH, and PGARCH, to evaluate the impact. It uses daily data on popular index S&P CNX Nifty of National Stock Exchange of India, during a period of more than a decade from June 12, 2000 to January 10, 2012. Findings of the study show that spot returns, volume, and volatility are high on expiration day and they build up further on the day after expiry which shows that the Indian market is weakly efficient. The expiration effect is mainly due to concentration of volumes in near-month contracts and absence of physical settlement.