Investigation the Reciprocal Effects of Saffron warehouse Receipt and Saffron Future Contracts in Iran Mercantile Exchange (IME)

The Present article examines factors that have effect on saffron warehouse receipt and on saffron futures in Iran commodity exchange. This study tries to identify the import of saffron future price and the two-way communication between these two financial instruments (saffron warehouse receipt and saffron futures) to saffron market.

In this regard, this study seeks to answer the existence of the relationship between linear and non-linear causality between these two financial instruments. The data were obtained daily in the period from June 2018 to July 2019 using price fluctuations in saffron warehouse receipt and saffron futures. Descriptive – analytical research methods and library data collection methods, regression models and the concept of neural networks with the help of Eviews software and R Economic Statistical Software were used. The price fluctuations of saffron warehouse receipt have been extracted using Arch family models.

Results indicate that there is a two linear causality relationship between warehouse receipt’s price fluctuation and future’s price fluctuation. To investigate the existence of non-linear causality between the two under studied, variables VAR model residual was used. The BDS test result show the existence of a non-linear relationship between the mentioned variables. The results of the non-linear granger causality test based on neural network show that futures price are the cause for price fluctuations in saffron warehouse receipt.

It can be stated that price discovery is formed in saffron future market and saffron warehouse receipt market follows the futures market.