VOLATILITY SPILLOVER AND CONTAGION EFFECTS BETWEEN EURODOLLAR FUTURE AND ZERO COUPONS MARKETS: EVIDENCE FROM ITALY

Abstract

This paper examines the time-varying conditional correlations between Eurodollar futures market and zero coupons of Banca Fideuram. We apply a bivariate dynamic conditional correlation (DCC) GARCH model in order to capture potential contagion effects between the markets for the period 2005-2017. Empirical results reveal contagion during the under investigation period regarding the twenty one bivariate models, showing that   Eurodollar futures market has a major impact on the zero coupons of Banca Fideuram. Findings have crucial implications for policymakers who provide regulations for the above derivative markets.