Anomalies in the Mexican Interest Rate Futures Market

Abstract

The growing importance of the Mexican TIIE-futures, which are amongst the most actively traded derivatives contracts worldwide, motivates the examination of their behavior. In particular, this study addresses the question of two sources of nonstationarity, day-of-the-week effects and abnormal behavior at expiration days. The analysis is done in the context of GARCH models using 36 rollover series for contracts expiring from 3 weeks to 35 months ahead. Evidence shows the presence of a weekend effect where rate changes tend to be positive on Mondays and negative on Fridays, together with higher volatility at expiration dates in short-term contracts.

Keywords: Interest rate futures, day-of-the-week effects, trading patterns

JEL Classification: G13, G15