An agent invests in two types of futures contracts, whose prices are possibly correlated arithmetic Brownian motions, and invests in a money market account with a constant interest rate. The agent pays a transaction cost for trading in futures proportional to the size of the trade. She also receives utility from consumption. The agent maximizes expected infinite-horizon discounted utility from ...

This paper examines hedging effectiveness in Greek stock index futures market. We focus on various techniques to estimate variance reduction from constant and time-varying hedge ratios. For both available stock index futures contracts of the Athens Derivatives Exchange (ADEX), we employ a variety of models to derive and estimate the effectiveness of hedging. We measure hedging effectiveness usi...

This paper describes and compares different methods of extracting the implied probability distribution of the underlying interest rate futures from the prices of traded options on these futures as well as from past futures prices. These methods are applied to short-term contracts on bank accepted bills trading on the Sydney Futures Exchange. The information on the distribution of the underlying...

The prices of the option and futures of a stock both reflect the market’s expectation of futures changes of the stock’s price. Their prices normally align with each other within a limited window. When they do not, arbitrage opportunities arise: an investor who spots the misalignment will be able to buy (sell) options on one hand, and sell (buy) futures on the other and make risk-free profits. H...

An agent invests in two types of futures contracts, whose prices are possibly correlated arithmetic Brownian motions, and invests in a money market account with a constant interest rate. The agent pays a transaction cost for trading in futures proportional to the size of the trade. She also receives utility from consumption. The agent maximizes expected infinite-horizon discounted utility from ...

This paper develops an equilibrium model of a competitive futures market in which investors trade to hedge positions and to speculate on their private information. Equilibrium return and trading patterns are examined. ~1! In markets where the information asymmetry among investors is small, the return volatility of a futures contract decreases with time-to-maturity ~i.e., the Samuelson effect ho...

Economists and financial analysts have begun to recognise the importance of the actions of other agents in the decision-making process. Herding is the deliberate mimicking of the decisions of other agents. Examples of mimicry range from the choice of restaurant, fashion and financial market participants, to academic research. Herding may conjure negative images of irrational agents sheepishly f...

This paper examines and thereafter models “terrorism futures,” recently created by the U.S. Pentagon but subsequently terminated when revelation of their existence caused a sharp congressional outcry. The termination is regrettable because this type of market – commonly referred to as a “decision market” – has proven itself to be a consistent and accurate predictor of future events. Using this ...

The price time series of the Italian government bonds (BTP) futures is studied by means of scaling concepts originally developed for random walks in statistical physics. The series of overnight price di erences is mapped onto a one-dimensional random walk: the bond walk. The analysis of the root mean square uctuation function and of the auto-correlation function indicates the absence of both sh...

Many organisational environments are far from equilibrium. The strategic flexibilities of modular product designs can help organisations prepare for an uncertain future, but managers must develop ways to imagine possible futures in order to use such flexibilities to respond to them. This paper discusses a scenario-based approach to anticipating and responding to uncertain futures by developing ...