Global warming has induced an increasing number of deadly tropical cyclones with a continuing trend. Developing high-functional climate risk management tools in forecasting, catastrophe modeling, pricing and hedging is crucial to curtail destruction. We develop a hurricane futures and futures-option pricing model in a doubly-binomial framework with stochastic news arrival intensity, and a corre...

We examine the markets for one-month LIBOR futures contracts and options on those futures for a year-end price effect consistent with the previously identified year-end rate increase in onemonth LIBOR. The cash market rate increase passes through to derivative prices, which allows the derivatives to properly hedge year-end interest rate risk. However, while the year-end effect appears in the de...

D erivatives such as futures contracts on Treasury bonds (T-bonds) anci notes are tailorniade for hedging interest-rate risk, and in priticiple, computation of an optimal hedge ratio should be easy. The risk-minimizing number oi contracts is obtained by dividing the price value of a basis point {PVBP) ofthe underlying cash position (i.e., the change in dollar value resulting trom a I basis poin...

The presumed source of the volatility is a trading strategy called “programmed trading.”2 This strategy, which essentially involves trading on small and shortlived price differences for the same group of stocks in the spot, futures and options markets, is not new. The introduction of stock jnde~futures around 1982 and the application of computer techniques to monitor price differences and trigg...

Motivated by features of low latency data in financial econometrics we study in detail integervalued Lévy processes as the basis of price processes for high frequency econometrics. We propose using models built out of the difference of two subordinators. We apply these models in practice to low latency data for a variety of different types of futures contracts.

Piazzesi and Swanson (2006) argues that the monthly excess returns on federal funds futures contracts are significantly positive on average; predictable using business cycle and financial market indicators; and that futures rates need significant adjustment for these excess returns. This paper shows that intermeeting moves of the federal funds rate by the FOMC can explain much of the variation ...

Futures on fresh farmed salmon traded at the Fish Pool market in Norway are analyzed context of Capital Asset Pricing Model (CAPM) and a corresponding three-factor model where contracts separated based their maturities. Looking into 1 month; 6 months 12 contracts, we find that all alphas most betas statistically insignificant. We conclude CAPM equilibrium condition holds Salmon futures prices m...

In this paper we view the problem of adequate electricity supply and demand as a dynamic process affected by several fundamental factors. By incorporating the effect of the available price signals on investment decisions we model the investment dynamics for (i) a system comprising both spot and futures (forward) markets, and for (ii) a system comprising a spot and an installed capacity (ICAP) m...

This paper investigates the impact of price limits on the Brazilian futures markets using high frequency data. The aim is to identify whether there is a cool-off or a magnet effect. For that purpose, we examine a tick-by-tick data set that includes all contracts on the São Paulo stock index futures traded on the Brazilian Mercantile and Futures Exchange from January 1997 to December 1999. The r...

I present a tractable framework, first developed in Trolle and Schwartz (2009), for pricing energy derivatives in the presence of unspanned stochastic volatility. Among the model features are i) a perfect fit to the initial futures term structure, ii) a fast and accurate Fourier-based pricing formula for European-style options on futures contracts, enabling efficient calibration to liquid plain...