~t1JNCE the introduction of futures trading in 3-month Treasury bills in 1976, yields on these futures contracts have been examined for clues as to market expectations of the future course of interest rates. Although there are difficulties in isolating these expectations, the yields on futures contracts do embody information about market expectations of future interest rates.’ However, similar ...

In this article, we develop a two-factor model of commodity prices that allows meanreversion in short-term prices and uncertainty in the equilibrium level to which prices revert. Although these two factors are not directly observable, they may be estimated from spot and futures prices. Intuitively, movements in prices for long-maturity futures contracts provide information about the equilibrium...

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...

The objective of this paper is to uncover the determinants of trading intensity in futures markets. In particular, the time between adjacent transactions (referred to as transaction duration) on the FTSE 100 index futures market is modeled using various augmentations of the basic autoregressive conditional duration (ACD) model introduced by Engle and Russell [Econometrica 66 (1998) 1127]. The d...

The last decade brought substantial increased participation in commodity markets by index funds that maintain long positions in the near futures contracts. Policy makers and academic studies have reached sharply different conclusions about the effects of these funds on commodity futures prices. This paper proposes a unifying framework for examining this question, noting that according to a simp...

This paper explores the linkage between corporate risk management strategies, investment, and economic stability in an open economy with a flexible exchange rate regime. Firms use currency futures contracts to manage their exchange rate exposure – caused by balance sheet effects as in Krugman (2000) – and therefore their investments’ sensitivity to currency risk. We find that, depending on whet...

The paper developes a general arbitrage free model for the term structure of interest rates. The principal model is formulated in a discrete time structure. It diiers substantially from the Ho{Lee{ Model (1986) and does not generate negative spot and forward rates. The results for the continuous time limit support this. The probability distribution with nite support is derived for the spot rate...

We consider optimal trade policy for a large country with private information. We show that the optimal tariff leads to a signaling equilibrium with higher tariffs and lower welfare than under complete information, whereas the optimal import quota replicates the complete information equilibrium and thus is superior to the tariff. We also show that, with the tariff, the country may be better off...