Implied volatility forecasts in the grains complex

This article finds that the implied volatilities of corn, soybean, and wheat futures options 4 weeks before option expiration have significant predictive power for the underlying futures contract return volatilities through option expiration from January 1988 through September 1999. These implied volatilities also encompass the information in out‐of‐sample seasonal Glosten, Jagannathan, and Runkle (GJR;1993) volatility forecasts. Evidence also demonstrates that when corn‐implied volatility rises relative to out‐of‐sample seasonal GJR volatility forecasts, implied volatility substantially overpredicts realized volatility. However, simulations of trading rules that involve selling corn option straddles when corn‐implied volatility is high relative to out‐of‐sample GJR volatility forecasts indicate that none of the trading rules would have been significantly profitable. This finding suggests that these options are not necessarily overpriced. © 2002 Wiley Periodicals, Inc. Jrl Fut Mark 22:959–981, 2002     

Complements or substitutes? Equivalent futures contract markets—the case of corn and soybean futures on U.S. and Japanese exchanges

This article examines the relationship between corn and soybean futures volumes for contracts traded in the United States and Japan. Because the contract specifications for corn and soybeans futures traded on the Chicago Board of Trade (CBOT), the Tokyo Grain Exchange (TGE), and the Kanmon Commodity Exchange (KCE) are highly similar, the existence of interactions might be expected. Previous research has identified price relationships between these similar contracts. With the advent of agricultural trading on the CBOT's Project A overnight electronic trading system, an overlap of trading times of the U.S. and Japanese exchanges for these commodity contracts resulted. An analysis of TGE and KCE corn and soybean futures volumes indicates that these contracts, rather than acting as substitutes, exhibit a complementary relationship. © 2002 Wiley Periodicals, Inc. Jrl Fut Mark 22:355–370, 2002     

Margin requirements and futures activity: Evidence from the soybean and corn markets

This article investigates the impact of margin requirements on the trading activity and volatility in futures markets. We extend Hartzmark's (1986) model for futures demand to allow for the costs imposed by margins to change across the maturity of the contract. The model is tested employing data from the soybean and corn markets. We find that trading activity becomes more sensitive to margin changes as one gets closer to contract maturity, inconsistent with the notion that margins impose important opportunity costs on futures traders. Margins are found to have a negative impact on the trading activities of all types of traders, though there is some evidence that margin alterations bring about changes in the makeup of the market. The data also indicate that margins are likely to be hiked during periods of increased volatility, and reduced during periods of relative stability, thus suggesting that margin alterations serve primarily as insurance to futures exchanges. © 1999 John Wiley & Sons, Inc. Jrl Fut Mark 19: 433–455, 1999     

The forward pricing function of the shipping freight futures market

This article investigates the unbiasedness hypothesis of futures prices in the freight futures market. Being the only market whose underlying asset is a service, it sets it apart from other markets investigated so far in the literature. Cointegration techniques, employed to examine this hypothesis, indicate that futures prices one and two months before maturity are unbiased forecasts of the realized spot prices, whereas a bias exists in the three-months futures prices. This mixed evidence is in agreement with studies in other markets and suggests that the acceptance or rejection of unbiasedness depends on the idiosyncrasies of the market under investigation and on the time to maturity of the contract. Despite the existence of a bias in the three-months prices, futures prices for all maturities are found to provide forecasts of the realized spot prices that are superior to forecasts generated from error correction, ARIMA, exponential smoothing, and random walk models. Hence it appears that users of the BIFFEX market receive accurate signals from the futures prices (regarding the future course of cash prices) and can use the information generated by these prices to guide their physical market decisions. © 1999 John Wiley & Sons, Inc. Jrl Fut Mark 19: 353–376, 1999     

Valuation of futures and commodity options with information costs

In this article, futures and commodity options are analyzed in the context of Merton's (1987) model of capital market equilibrium with incomplete information. First, following Dusak (1973) and Black (1976), the conditions under which Merton's model can be applied to the valuation of forward and futures contracts are proposed. Then an application to futures markets is given. We provide a partial differential equation and the formulas for European commodity options, futures contracts, and American options in the same context. The models are simulated and compared to standard models with no information costs. We find that model prices are not significantly different from standard model prices. However, our models correct for some pricing biases in standard models. In particular, they reduce the overvaluation bias for European and American commodity options. It seems that the costs of gathering and processing information regarding the option and its underlying asset play a role in explaining the biases observed in standard models. This work can be applied to other futures markets. © 1999 John Wiley & Sons, Inc. Jrl Fut Mark 19: 645–664, 1999     

Role of delivery options in basis convergence

The corn futures contract, traded on the Chicago Board of Trade, provides sellers with delivery options about the timing of delivery, the location of delivery, and the grade to be delivered. These options presumably have values that can vary from one delivery month to the next. The joint values of the timing and location options are estimated for each delivery month for the years 1989 through 1997. These estimates are then used in regression models to determine the degree to which they influence basis variability on the first day of the maturity month. Econometric models are also developed to see if the estimated implicit options values are useful in improving the forecasts of basis convergence over the 2‐month period prior to maturity. The results suggested that variation in the delivery options values in the corn futures contract does indeed help explain basis variability on the first day of maturity. An option‐value variable, based on estimated values two months prior to maturity, resulted in occasional, small improvements (from a statistical point of view) in the precision of forecasts. The existence of delivery options increases basis variability at maturity, but it is difficult to use this information to improve forecasts of basis convergence. One limitation of the analysis is that the Chicago cash market had few transactions per day during the sample period, and hence the reported spot prices may be inadequate for making high‐quality estimates of the options values. © 2002 Wiley Periodicals, Inc. Jrl Fut Mark 22:783–809, 2002     

国产大豆之惑

<正>2012粮食整体丰收背景下,大豆产量持续减少,国产大豆的出路争论再次响起。种植面积减少、产量下降、豆农积极性不高,2012年的大豆生产难如人意。与此同时,伴随着进口大豆与国产大豆争夺市场、榨油用豆与食品用豆互相挤压,外资企业加入收购行列,国产大豆纠结之惑仍在加剧。连续减产"今年是连续三年减产,黑龙江大豆的产量在逐渐变少",黑龙江大豆协会副秘书长王小语2012年11月2日表示,"现在最终的数据还没有出来,我们估计会比上年减少30%左右。"黑龙江统计局数     

The performance of event study approaches using daily commodity futures returns

Simulations are conducted to assess the inferential accuracy of statistical event study approaches using daily futures returns. Methods examined include constant mean return models and several regression models—OLS, GARCH(1,1), and a GARCH(1,1) model having an error term with a Student's t distribution. The simulations address four of the most commonly analyzed agricultural futures commodities—corn, soybeans, live cattle, and hogs. In terms of the size of the test statistics, constant mean return models with short normal periods perform poorly, leading to unacceptably high rejection rates of the null hypothesis. Test statistics from constant mean return models with longer normal periods, OLS, and GARCH specifications provide rejection rates largely consistent with those of a unit normal distribution. Test statistics from all models are powerful enough to detect abnormal performance levels below those that would trigger limit locks. At small levels of abnormal performance the GARCH(1,1) model with a t distribution was consistently the most powerful model. © 2004 Wiley Periodicals, Inc. Jrl Fut Mark 24:533–555, 2004     

Delivery horizon and grain market volatility

We study the difference in the volatility dynamics of CBOT corn, soybeans, and oats futures prices across different delivery horizons via a smoothed Bayesian estimator. We find that futures price volatilities in these markets are affected by inventories, time to delivery, and the crop progress period and that there are important differences in the effects across delivery horizons. We also find that price volatility is higher before the harvest starts in most cases compared to the volatility during the planting period. These results have implications for hedging, options pricing, and the setting of margin requirements. © 2010 Wiley Periodicals, Inc. Jrl Fut Mark 30:846–873, 2010     

Modeling discontinuous periodic conditional volatility: Evidence from the commodity futures market

This paper examines a wide variety of models that allow for complex and discontinuous periodic variation in conditional volatility. The value of these models (including augmented versions of existing models) is demonstrated with an application to high frequency commodity futures return data. Their use is necessary, in this context, because commodity futures returns exhibit discontinuous intraday and interday periodicities in conditional volatility. The former of these effects is well documented for various asset returns; however, the latter is unique amongst commodity futures returns, where contract delivery and climate are driving forces. Using six years of high‐frequency cocoa futures data, the results show that these characteristics of conditional return volatility are most adequately captured by a spline‐version of the periodic generalized autoregressive conditional heteroscedastic (PGARCH) model. This model also provides superior forecasts of future return volatility that are robust to variation in the loss function assumed by the user, and are shown to be beneficial to users of Value‐at‐Risk (VaR) models. © 2004 Wiley Periodicals, Inc. Jrl Fut Mark 24:805–834, 2004     

Price discovery in commodity derivatives: Speculation or hedging?

We investigate whether commodity futures or options markets play a more important role in the price discovery process in the six most actively traded markets: crude oil, natural gas, gold, silver, corn, and soybeans. Using new information leadership techniques, we report new evidence and report that both markets make a meaningful contribution to price discovery in recent times; however, on average, options lead futures in reflecting new information for a majority of these commodities. We find that increased speculation, rather than hedging activity, in commodity derivatives is a key determinant of price discovery in the options markets.     

Price relations among hog,corn, and soybean meal futures

This paper examines the relations among hog, corn, and soybean meal futures price series using the Perron (1997) unit root test and autoregressive multivariate cointegration models. Accounting for the significant seasonal factors and time trends, we find the three series are cointegrated with one single cointegrating vector, whose coefficients are comparable to the ratios used by the United States Department of Agriculture (USDA). Ex‐post trading simulations that utilize the cointegration results generate significant profits, suggesting that market expectations may not fully incorporate the mean‐reverting tendencies as indicated by the cointegration relations, and that inefficiency exists in these three commodity futures markets. Results from our ex‐ante trading simulations that employ the USDA ratios also provide some evidence in this regard. © 2005 Wiley Periodicals, Inc. Jrl Fut Mark 25:491–514, 2005     

Modeling seasonality in agricultural commodity futures

The stochastic behavior of agricultural commodity prices is investigated using observations of the term structures of futures prices over time. The continuous time dynamics of (log‐) commodity prices are modeled as a sum of a deterministic seasonal component, a non‐stationary state‐variable, and a stationary state‐variable. Futures prices are established by standard no‐arbitrage arguments and the Kalman filter methodology is used to estimate the model parameters for corn futures, soybean futures, and wheat futures based on weekly data from the Chicago Board of Trade for the period 1972–1997. Furthermore, in a discussion of the estimated seasonal patterns in agricultural commodity prices, the paper provides empirical evidence on the theory of storage that predicts a negative relationship between stocks of inventory and convenience yields; in particular, convenience yields used in this analysis are extracted using the Kalman filter. © 2002 Wiley Periodicals, Inc. Jrl Fut Mark 22:393–426, 2002     

Modeling nonlinear dynamics of daily futures price changes

The purpose of this article is to characterize linear and nonlinear serial dependence in daily futures price changes. The daily prices of four futures are included in this study: (i) S&P 500; (ii) Japanese yen; (iii) Deutsche mark; and (iv) Eurodollar. Our major empirical findings are: (i) Based on the results of nonlinearity tests (that is, the BDS, the Q², and the TAR-F tests), we found all futures price changes contain nonlinearity in the series; (ii) a GARCH model can explain the source of nonlinearity for three out of four series; (iii) a threshold autoregressive model and autoregressive volatility model can adequately represent nonlinear dynamics of S&P 500 series; and (iv) deterministic chaos is not evident in the scaled residuals from the nonlinear time series models. Hence we favor a statistical time series approach to represent the data-generating mechanism of futures price changes. © 1999 John Wiley & Sons, Inc. Jrl Fut Mark 19: 325–351, 1999     

东北地区大豆振兴的思考:基于成本收益视角

大豆是我国重要的经济作物与粮食作物之一,研究大豆的成本收益,是提高大豆综合生产能力、实现大豆振兴计划、保障国家粮食安全问题的现实要求。从东北地区大豆生产概况出发,在整合生产成本各项指标的基础上,对东北地区大豆、玉米和水稻的生产成本构成及收益差异进行实证研究,并据此提出加大大豆科研投入力度、培育新品种、扩大种植面积、构建国产大豆与进口大豆错位竞争、相互补充的新格局、完善相关补贴政策、建设生产基地等建议。     

Determinants of endogenous price risk in corn and wheat futures markets

This analysis evaluates determinants of price variability in U.S. corn and wheat futures markets. The analysis is conducted in two segments. In the first segment, conditional heteroscedasticity models of price variability are estimated and used to examine the extent to which market conditions influence price variability. The second component of the analysis uses nonstructural vector autoregressive models to evaluate factors related to implied volatilities calculated from options premia. Our results indicate that corn and wheat price variability is significantly related to the ratio of use to stocks, futures market activity, and growing conditions. In addition, important seasonal and autoregressive effects are revealed. Our results provide an intuitive interpretation for GARCH and ARCH effects, which are often demonstrated for futures price data. © 2000 John Wiley & Sons, Inc. Jrl Fut Mark 20:753–774, 2000     

Use of high-frequency data to evaluate the performance of dynamic hedging strategies

The hedging performance results of generalized autoregressive conditional heteroskedasticity models are mixed; we address this herein by adopting an asymptotic setting to determine the relative performance of competing hedge ratios. The proxy variable is constructed through precise realized measures rather than through noisy squared returns because the substitution of the latent true hedged portfolio variance with a noisy proxy renders the loss function incapable of ranking forecasts consistently. The merits of allowing some features in modeling the spot–futures distribution are assessed. Empirical comparisons suggest that hedgers may favor the wrong model when the quality of the proxy variable deteriorates.     

Risk arbitrage opportunities in petroleum futures spreads

This article investigates the long-term pricing relationship among crude oil, unleaded gasoline, and heating oil futures prices, and finds that these commodities futures prices are cointegrated. The study finds that the spreads between crude oil and its end products are stationary. Furthermore, this article investigates the risk arbitrage opportunities in three types of popularly traded petroleum futures spreads and finds that historically profitable risk arbitrage opportunities existed and were statistically significant. However, one cannot be certain that these opportunities still exist. The research also finds that moving averages are valid test variables for measuring spreads. Statistical and tabular constructions are used to illustrate findings. © 1999 John Wiley & Sons, Inc., Jrl Fut Mark 19: 931–955, 1999     

Estimation and hedging effectiveness of time‐varying hedge ratio: Flexible bivariate garch approaches

Bollerslev's ( 1990 , Review of Economics and Statistics, 52, 5–59) constant conditional correlation and Engle's (2002, Journal of Business & Economic Statistics, 20, 339–350) dynamic conditional correlation (DCC) bivariate generalized autoregressive conditional heteroskedasticity (BGARCH) models are usually used to estimate time‐varying hedge ratios. In this study, we extend the above model to more flexible ones to analyze the behavior of the optimal conditional hedge ratio based on two (BGARCH) models: (i) adopting more flexible bivariate density functions such as a bivariate skewed‐t density function; (ii) considering asymmetric individual conditional variance equations; and (iii) incorporating asymmetry in the conditional correlation equation for the DCC‐based model. Hedging performance in terms of variance reduction and also value at risk and expected shortfall of the hedged portfolio are also conducted. Using daily data of the spot and futures returns of corn and soybeans we find asymmetric and flexible density specifications help increase the goodness‐of‐fit of the estimated models, but do not guarantee higher hedging performance. We also find that there is an inverse relationship between the variance of hedge ratios and hedging effectiveness. © 2009 Wiley Periodicals, Inc. Jrl Fut Mark 30:71–99, 2010     

Analyst forecasts and price discovery in futures markets: The case of natural gas storage

We investigate analyst forecasts in a unique setting, the natural gas storage market, and study the contribution of analysts in facilitating price discovery in futures markets. Using a high‐frequency database of analyst storage forecasts, we show that the market appears to condition expectations regarding a weekly storage release on the analyst forecasts and beyond that of various statistical‐based models. Further, we find that the market looks through the reported consensus analyst forecast and places differential emphasis on the individual forecasts of analysts according to their prior accuracy. Also, the market appears to place greater emphasis on analysts' long‐term accuracy than on their recent accuracy. © 2009 Wiley Periodicals, Inc. Jrl Fut Mark 29:451–477, 2009