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Inter-market spread trading: evidence from UK index futures markets

Butterworth, D.; Holmes, P.

Authors

D. Butterworth

P. Holmes



Abstract

This paper employs the theoretical no-arbitrage conditions to investigate whether the inter-market spread comprising of positions in the FTSE 100 contract and FTSE Mid 250 contract is priced according to fair value. The results show that while transaction cost limits are violated on a number of occasions, the overall profitability of the strategy is seriously impaired by the difficulty, which traders face, in liquidating their positions before relative market movements between the two legs of the spread occur.

Citation

Butterworth, D., & Holmes, P. (2002). Inter-market spread trading: evidence from UK index futures markets. Applied financial economics, 12(11), 783-790. https://doi.org/10.1080/09603100110044236

Journal Article Type Article
Publication Date Nov 1, 2002
Deposit Date Jan 17, 2008
Journal Applied Financial Economics
Print ISSN 0960-3107
Electronic ISSN 1466-4305
Publisher Routledge
Peer Reviewed Peer Reviewed
Volume 12
Issue 11
Pages 783-790
DOI https://doi.org/10.1080/09603100110044236
Public URL https://durham-repository.worktribe.com/output/1624849