Degree of Integration Between Brent Oil Spot and Futures Markets: Intraday Evidence

We investigate the integration of oil spot and futures markets using matched, intraday data to avoid nonsynchronous trading issues. Our evidence indicates highly integrated spot and futures markets. Economic shocks that arise in spot markets are quickly transmitted to the futures markets approximately one-for-one. Most of the reaction occurs within minutes. Similarly, economic shocks arriving in futures markets are transmitted to spot markets one-for-one, once again, within minutes consistent with market efficiency. In general, our findings indicate well-functioning, well-integrated spot and futures oil markets that are informationally efficient and that perform the functions of both price discovery and risk transfer. To the best of our knowledge, this is the first article to work with precisely matched customized data in futures markets, specifically oil futures markets.     

Consumption Betas and Backwardation in Commodity Markets

This paper examines the relationship between commodity consumption betas and realized commodity futures contract risk premiums. A linear relationship between risk premiums and consumption betas is developed based on a consumption oriented CAPM. The parameters of this linear model are estimated using fourteen commodities.     

Informed Futures Trading and Price Discovery: Evidence from Taiwan Futures and Stock Markets

This article focuses on the information effects between the futures market and its spot market. Intraday data are used to investigate the lead-lag relationships between the returns and trading activity of Taiwan stock index futures and the spot returns. We focus on the transmission direction and the sources of information. Consistent with most previous studies, our results show that other than the contemporaneous relationship predicted by carry-cost theory and efficient market theory, futures returns significantly lead spot returns, which implies that informed trades may occur in the futures market. Using private transaction information, net open buy, as a proxy for futures trading activity and distinguishing different types of futures traders, we find that foreign institutional traders are the major source of informed trades because their trading has predictive power for future movements in both spot and futures prices. Traders in other categories are information laggards.     

Shock and Volatility Transmission in the Futures and Spot Markets: Evidence from Turkish Markets

This paper examines the volatility transmission mechanism between the futures and corresponding underlying asset spot markets, focusing on Turkish currency and stock index futures traded on the lately established Turkish Derivatives Exchange (TURKDEX). Employing multivariate generalized autoregressive conditional heteroskedasticity modeling, which allows for potential spillovers and asymmetries in the variance-covariance structure for the market returns, the paper investigates the volatility interactions among each of the three futures-spot market systems. For all market systems under study, the volatility spillovers are found to be important and bidirectional. For the stock index market system, in line with the previous literature, volatility shows asymmetric behavior and strong asymmetric shock transmission. The main implication is that investors need to account for volatility spillovers and asymmetries among the futures and the spot markets to correctly build hedging strategies.     

建立期货市场规避油价风险

经国务院批准,国家发展改革委决定自今年3月26日起,适当提高成品油价格水平,将汽油和柴油出厂价格每吨分别提高300元和200元,当日,北京市93号汽油涨至4．65元/升。随着我国经济的持续快速发展,国内石油消费对外依存度不断提高。国内成品油价格大幅度低于国际市场价格,与原油价格严重倒挂,发改委认为,这不利于调动炼油企业生产积极性、保障成品油市场供应和促进石油资源的节约,影响经济的平稳运行。     

Forward and Futures Prices: Evidence from the Foreign Exchange Markets

Cornell and Reinganum (1981) , hereafter CR, report that price differentials for future contracts and forward contracts are statistically insignificant in foreign exchange markets. Based on this finding, CR conclude that marking-to-market is insignificant in the formulation of currency futures prices. This note identifies two potential concerns with the CR tests. One problem relates to the timing of delivery dates for “matched” contracts. A second problem relates to the time period for the CR study. We show that correcting for these problems does not affect the overall conclusions of the CR study; marking-to-market does not appear to have a significant effect on currency futures prices.     

Extreme Correlation of Stock and Bond Futures Markets: International Evidence

This study explores time‐varying extreme correlation of stock–bond futures markets in three major developed countries. In the United States and the United Kingdom, there is evidence of positive extreme stock–bond correlation when both futures markets are extremely bullish or bearish. In Germany, stock–bond futures extreme correlation is negative, suggesting the most diversification potentials of bond futures when German stock index futures market plunges. Macroeconomic news, the business cycle, and the stock market uncertainty all significantly affect the median stock–bond futures correlation. However, only the stock market uncertainty still significantly affects the extreme stock–bond futures correlation when the stock market is extremely bearish.     

Forward and Futures Prices: Evidence from the Foreign Exchange Markets

Empirical studies of the Treasury Bill markets have revealed substantial differences between the futures price and the implied forward price. These differences have been attributed to taxes, transaction costs, and the settling up procedure employed in the futures market. This paper examines the forward and futures prices in foreign exchange in an attempt to distinguish between the competing explanations.     

Default Premiums in Commodity Markets: Theory and Evidence

We model the effect of nonperformance risk on forward and futures pricing and look for evidence of nonperformance risk in precious metals futures prices from the “Hunt Brothers”episode. Changes in default premiums are measured and related to the sequence of events in the metals markets during this period. Results suggest first that ex ante costs of nonperformance can be a significant, priced factor in commodity markets and second that the arrival of new information is often associated with changes in these costs. The evidence has implications for both theoretical and empirical research on commodity markets.     

Valuation of American Futures Options: Theory and Empirical Tests

This paper reviews the theory of futures option pricing and tests the valuation principles on transaction prices from the S&P 500 equity futures option market. The American futures option valuation equations are shown to generate mispricing errors which are systematically related to the degree the option is in-the-money and to the option's time to expiration. The models are also shown to generate abnormal risk-adjusted rates of return after transaction costs. The joint hypothesis that the American futures option pricing models are correctly specified and that the S&P 500 futures option market is efficient is refuted, at least for the sample period January 28, 1983 through December 30, 1983.     

非线性、分形与期锌市场价格

从非线性角度研究期锌市场,运用R/S分析法对期锌市场进行分析,发现期锌市场的Hurst指数为0.6183,其价格收益率序列是分维时间序列,具有分形结构,维数为1.6174。期锌市场的平均周期长度为176天,具有强持续性和相关性。关联系数为19.47%,远远大于国外相关市场。在风险方面,期锌市场的风险比期铜市场的要小,而比股票市场的风险要大。     

"Marking-to-Market" and Treasury-Bill Futures Prices: Some Empirical Evidence

Financial economists have not found empirical evidence of a “marking‐to‐market” effect in Treasury‐bill futures contracts, despite a firm theoretical basis for its existence. Therefore, we speculate that confounding effects, possibly due to liquidity preferences, influence futures‐forward price spreads. By using an empirical specification that allows for both effects, we present empirical evidence that Treasury‐bill futures‐forward price spreads are sensitive to the volatility of the underlying commodity in ways predicted by the theory of the marking‐to‐market effect.     

中国利率市场的价格发现——对国债现货、期货以及利率互换市场的研究

本文采用信息份额模型和基于向量自回归(VAR)模型的格兰杰因果检验,研究了国债现货、国债期货和利率互换三个市场之间的价格发现机制。信息份额模型表明,从整体来看利率互换相对于国债期货和国债现货都具有信息优势,而国债期货相对于国债现货具有信息优势。另外,国债期货的价格发现能力相对于另外两个市场都在随时间增强。格兰杰因果检验结果显示,利率互换在价格发现中单向引领国债期货以及国债现货,国债期货单向引领国债现货。所有结果一致表明, 利率互换和国债期货这两种利率衍生产品在引导中国利率市场价格发现中发挥了重要作用。     

Dual Trading in Futures Markets

With dual trading, brokers trade both for their customers and for their own account. We study dual trading and find that customers who are less likely to be informed have higher expected profits with dual trading while customers who are more likely to be informed have higher expected profits without dual trading. We also examine the effects of frontrunning. We test the major empirical implications of our model. Consistent with the model, dual traders earn higher profits than non-dual traders, and customers of dual-trading brokers do better than customers of non-dual-trading brokers.     

Holiday Trading in Futures Markets

In this paper, we find significantly higher preholiday returns in futures contracts compared to nonholiday returns. The findings are consistent with the inventory adjustment hypothesis, since higher preholiday returns associated with lower trading volume are most pronounced for exchange-closed holidays. There is evidence of positive postholiday returns associated with higher trading volume for exchange-open holidays. This is consistent with positive holiday sentiments. The holiday effect is uniquely independent: The magnitude of excess holiday returns is the largest among all seasonal variations.     

Returns to Speculators and the Theory of Normal Backwardation

A nonparametric statistical procedure is employed to examine the returns to speculators in wheat, corn, and soybeans futures markets. We find that the theory of normal backwardation is supported. Moreover, the presence of the risk premiums to speculators tends to be more prominent in recent years than in earlier years. We also find that large wheat speculators as a whole possessed some superior forecasting ability. The evidence is inconsistent with the hypothesis that commodity futures prices are unbiased estimates of the corresponding future spot prices.     

Asymmetric Volatility,Skewness, and Downside Risk in Different Asset Classes: Evidence from Futures Markets

This study examines the cross‐sectional variation of futures returns from different asset classes. The monthly returns are positively correlated with downside risk and negatively correlated with coskewness. The asymmetric volatility effect generates negatively skewed returns. Assets with high coskewness and low downside betas provide hedges against market downside risk and offer low returns. The high returns offered by assets with low coskewness and high downside betas are a risk premium for bearing downside risk. The asset pricing model that incorporates downside risk partially explains the futures returns. The results indicate a unified risk perspective to jointly price different asset classes.     

Pricing of Futures Contracts on Coupon Bonds: Empirical Evidence from Finland

This paper investigates the pricing of the two year old Finnish bond futures market. We show that the market has mispriced the futures contracts during the test period with the futures contracts being underpriced most of the time. We also measure whether the futures market has prediction power over the bond market. Our results suggest that there is a lead-lag relationship between the Finnish bond and the futures markets.     

Financial Markets Trends and Studies of Singapore Futures Markets

In this paper we explore some recent trends in the financial market and also report some studies of the Singapore futures markets. A characterization of trends shows that national securities markets are much closer than before. This means the linkages between securities and their derivatives and amongst themselves have be come much stronger. Secondly, the advent of sophisticated risk products and instruments and the knowledge to use them effectively would become a common theme together with the idea of value enhancements. Thirdly, computerizations and the internet will play an increasingly important role. So will empirical financial research become increasingly microscopic. The discussion will be supported by the experiences of the Singapore futures markets and various empirical research evidences. The paper also provides a detailed study of causality-in-variance test of information transmission between SIMEX and Osaka Stock Exchange on the Nikkei 225 stock index futures trading prior to, during, and immediately after the announcement of the collapse of Barings. The results are indicative of very strong international market linkages and a portent of things to come.