In this paper we investigate the statistical properties of wholesale electricity spot and futures prices traded on the New York Mercantile Exchange for delivery at the California-Oregon Border. Using daily data for the years 1998 and 1999, we find that many of the characteristics of the electricity market can be viewed to be broadly consistent with efficient markets. The futures risk premium fo...

This study adopts derivative pricing as an indicator of market expectations, with those results suggesting that general investors can use market expectations to predict the final settlement value of underlying assets. Most investment textbooks note that one of the major functions of futures is price discovery. Similarly, the implied volatility associated with option prices can be used to discov...

In this paper, we examine the statistical forecast accuracy of econometric models, surveys and futures rates in predicting the LIBOR-Federal Funds Rate (LIBOR-FF) spread during and after the financial crisis. We provide evidence that the futures market forecast outperforms all competing forecasts during and after the financial crisis. Our results also suggest that the predictive accuracy of the...

For the estimation problem of the realized volatility, covariance and hedging coefficient by using high frequency data with possibly micro-market noises, we use the Separating Information Maximum Likelihood (SIML) method, which was recently developed by Kunitomo and Sato (2008a,b). By analyzing the Nikkei 225 futures and spot index markets, we have found that the estimates of realized volatilit...

Prediction Markets in Theory and Practice Prediction Markets, sometimes referred to as “information markets,” “idea futures” or “event futures”, are markets where participants trade contracts whose payoffs are tied to a future event, thereby yielding prices that can be interpreted as market-aggregated forecasts. This article summarizes the recent literature on prediction markets, highlighting b...

Palm oil is the most consumed and traded vegetable oils in the EU and the world. Increasing non-food uses for vegetable oils in especially feedstock of biofuels in recent years have caused the price volatility to rise in both EU and global market. The most efficient pricing of crude palm oil (CPO) is to found on Bursa Malaysia (BMD), and it provides by far the world’s most liquid palm oil contr...

Based on the data samples using EUA spot and futures in the ICE and BLUENEXT exchange platform in the European Union emissions trading scheme (EU ETS), this paper propose the market behavior of convenience yields and examine the options feature of convenience yields for emission allowances. When the convenience yields of emission allowances are positive, the convenience yields are positively re...

This paper presents an application of the recently developed method for simultaneous dimension reduction and metastability analysis of high-dimensional time series in the context of computational finance. Further extensions are included to combine state-specific principal component analysis (PCA) and state-specific regressive trend models to handle the high-dimensional, nonstationary data. The ...

This paper offers an alternative to the conventional explanation of the 2007-08 food price crisis in terms of escalating demand or dwindling supply. Instead, its focus is on the legalinstitutional structure of commodity futures markets, which has witnessed a drastic alteration in the role of speculators. These have transformed from “market makers” (that keep commodity futures markets liquid by ...

We provide an explanation for the explosive growth in the popularity of Stock Index Futures contracts. In our economy there are three broad classes of traders that place orders with a competitive market maker that sets a bid-ask spread arising from adverse selection. Informed traders trade on the basis of their private information about the value of particular securities. Liquidity traders trad...