Contemporaneous intraday volume, option, and futures volatility transmissions across parallel markets

Michael Chng, Gerard Gannon*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

5 Citations (Scopus)


The primary objective of this article is to investigate volatility transmission across three parallel markets operating on the Sydney Futures Exchange (SFE), both within and out of sample. Half-hourly observations are sampled from transaction data for the share price index (SPI) futures, SPI futures options, and 90-day bank accepted bill (BAB) futures markets, and the analysis is carried out using the simultaneous volatility (SVL) system of equations as well as competing volatility models. The results confirm the poor ability of GARCH models to fit intraday data. This study also applies an artificial nesting procedure to evaluate the out-of-sample volatility forecasts. Implied volatility has very limited (if any) predictive power when evaluated in isolation, whereas the SVL model with implied volatility embedded provides incremental information relative to competing model forecasts.

Original languageEnglish
Pages (from-to)49-68
Number of pages20
JournalInternational Review of Financial Analysis
Issue number1
Publication statusPublished - 2003
Externally publishedYes


  • Out-of-sample forecast
  • Simultaneous effects
  • Volatility transmission


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