The impact of the size, liquidity and price volatility of the underlying stock market on the development of the derivatives market: the case of indian market

Abstract

Derivatives have redefined and made a revolution in the financial sector. Specially, the Indian derivatives market witnessed a rapid growth between 2000 and 2015. Accordingly, this paper was conducted to evaluate the relationship between the development of the Indian derivatives market and the following factors: size, liquidity and price volatility of the underlying stock market, by applying the Vector Error-Correction model (VECM).