THE IMPACT OF SINGLE STOCK FUTURES ON THE

Abstract

Derivatives have become increasingly popular in the past two decades throughout the world’s leading financial markets. They have been accused by some of increasing the volatility of the underlying asset’s price. Volatility of asset prices is used extensively throughout the financial services industry, from valuing derivatives to estimating risk. Correctly estimating and forecasting volatility is important to ensure accurate pricing and understanding of risk. This research looks at data from South Africa to investigate the impact of Single Stock Futures on the volatility of the underlying stock. The main finding of this research is that there is no evidence to support increased volatility of the underlying stock due to the introduction of Single Stock Futures.