In 2003, trading of commodity futures shifted from single commodity, regional exchanges to national exchanges that trade multiple commodities. This paper examines price discovery and hedging effectiveness of commodity futures after this change and concludes that,on average, futures prices do discover information relatively efficiently,but helps to manage risk less efficiently. The paper uses th...

In this paper we discuss how our insight into the grounds of existence of futures markets has changed. We discuss futures market research within agricultural marketing, on the one hand, and within finance, on the other hand. The research within these two disciplines may be considered complementary. Subsequently, a new research model is presented which integrates both strains of research. This m...

Research on the impact of the introduction of derivatives on the market volatility has reported mixed evidences. In this paper, we study the volatility implications of the introduction of derivatives on the stock market in India using S&P CNX IT index. To account for the heteroscedasticity in the time series, GARCH model is used. We find clustering and persistence of volatility in different deg...

In recent years, carbon emission markets have become liquid and promising markets within the European Union emissions trading scheme (EU ETS). In order to fit and forecast futures price for CO2 emissions allowances, we propose a new N-factor affine term structure model for CO2 futures price and estimate parameters in the new affine model by using the Kalman filter technique. Our empirical resul...

This research investigates the hedging effectiveness of stock index futures markets in Malaysia and Singapore by employing various hedge ratio estimation methods, which comprises of the conventional OLS model, VECM, EGARCH and bivariate GARCH. The empirical results indicate that the Kuala Lumpur Futures Index (KLFI) provides higher hedging effectiveness compared to the Straits Times Index (STI)...

Commodity derivatives are becoming an increasingly important part of the global derivatives market. Here we develop a tractable stochastic volatility model for pricing commodity derivatives. The model features unspanned stochastic volatility, quasi-analytical prices of options on futures contracts, and dynamics of the futures curve in terms of a low-dimensional affine state vector. We estimate ...

T existence of mandatory emission trading schemes in Europe and the United States, and the increased liquidity of trading on futures contracts on CO2 emissions allowances, led naturally to the next step in the development of these markets: These futures contracts are now used as underliers for a vibrant derivative market. In this paper, we give a rigorous analysis of a simple risk-neutral reduc...

We construct asset markets of the type studied in Smith et al. (1988), in which price bubbles and crashes are widely observed. In addition to a spot market, there are futures markets in operation, one maturing in each period of the life of the asset. We find that when futures markets are present, bubbles do not occur in the spot markets. The futures markets seem to reduce the speculation and th...

The number of meat recalls has increased markedly in recent years. This research examines the impact of beef and pork recall announcements on nearby daily live cattle and lean hog futures market prices, respectively. Results indicate medium-sized beef recalls that are of serious health concerns have a marginally negative impact on short-term live cattle futures prices. However, results are not ...

In this paper we propose a market consistent futures price dynamics model for cap-andtrade schemes, designed in the spirit of the European Union’s Emissions Trading Scheme (EU ETS). Historical price dynamics for the EU ETS suggest that, both, European emission Allowances (EUAs) and Certified Emission Reductions (CERs), certificates, which are generated through the Clean Development Mechanism (C...