In contrast to the majority of literature that focuses on financial product volatility during financial crises, this paper stands as the first study delving into the asymmetric threshold effects on the volatility of intermediate-term and long-term U.S. Treasury bond futures prices during the inverted yield curve period. We present compelling evidence confirming the presence of both TAR (Threshold AutoRegressive) and MTAR (Momentum Threshold AutoRegressive) effects within the sample period. Using a synchronous grid search algorithm, we simultaneously searched for the optimal threshold values for TAR and MTAR models. Our empirical findings indicate a reduction in the volatility of U.S. bond futures prices during the period of yield curve inversion. Moreover, negative shocks trigger the TAR and MTAR threshold effects, leading to an increase in the volatility of bond futures prices. Furthermore, our research has revealed that the total effects of TAR and MTAR models display contrasting correlations in response to market shocks. Consequently, if the magnitude of market shocks changes exceeds the threshold level, the influence of the TAR threshold effect could be offset by the MTAR effect. As a result, the determination of threshold values plays a significant role and simultaneously reflects the volatility sensitivity of bond futures. Based on the findings of this study regarding asymmetric volatility and sensitivity comparisons, the optimal U.S. Treasury futures options trading strategies during periods of yield curve inversion are to purchase 30-year Treasury bond futures put options or to buy 10-year Treasury bond futures call options. This study investigates the varied responses of bond futures volatility to market shocks and assesses the sensitivity of volatility to these shocks by analyzing how impacts are transmitted through threshold values and their economic implications.
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