Price discovery and volatility spillovers in index futures markets: Some evidence from Mexico

This paper investigates the hypotheses that the recently established Mexican stock index futures market effectively serves the price discovery function, and that the introduction of futures trading has provoked volatility in the underlying spot market. We test both hypotheses simultaneously with daily data from Mexico in the context of a modified EGARCH model that also incorporates possible cointegration between the futures and spot markets. The evidence supports both hypotheses, suggesting that the futures market in Mexico is a useful price discovery vehicle, although futures trading has also been a source of instability for the spot market. Several managerial implications are derived and discussed. (C) 2004 Elsevier B.V. All rights reserved.

Entangled-state cycles from conditional quantum evolution

A system of cascaded qubits interacting via the one-way exchange of photons is studied. While for general operating conditions the system evolves to a superposition of Bell states (a dark state) in the long-time limit, under a particular resonance condition no steady state is reached within a finite time. We analyze the conditional quantum evolution (quantum trajectories) to characterize the asymptotic behavior under this resonance condition. A distinct bimodality is observed: for perfect qubit coupling, the system either evolves to a maximally entangled Bell state without emitting photons (the dark state) or executes a sustained entangled-state cycle-random switching between a pair of Bell states while emitting a continuous photon stream; for imperfect coupling, two entangled-state cycles coexist, between which a random selection is made from one quantum trajectory to another.