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...

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 article examines the impact of SGX MSCI Taiwan Index Futures on the volatility of the Taiwan stock market. The empirical work is conducted with the use of weekly stock returns from 1995 to 1998 and by applying an expanded EGARCH model. Our findings show that there is no structural change on either the conditional or the unconditional variance after the introduction of index futures contrac...

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 ...

Several empirical studies report that asset liquidity has a significant impact on asset prices. For example, Amihud and Mendelson (1986), Silber (1991), Kadlec and McConnell (1994), and Brennan and Subrahmanyam (1996) report that stock prices are c.p. the lower, the lower stock liquidity is. For bond markets similar evidence is reported by Sarig and Warga (1989), Amihud and Mendelson (1991), Bo...

This study evaluates the efficiency of cross hedging with single stock futures (SSF) contracts. We propose a new technique for hedging exposure to an individual stock that does not have options or exchange-traded SSF contracts written on it. Our method selects as a hedging instrument a portfolio of SSF contracts which are selected based on how closely matched their underlying firm characteristi...

The Term Structure of Interest-Rate Futures Prices We derive general properties of two-factor models of the term structure of interest rates and, in particular, the process for futures prices and rates. Then, as a special case, we derive a no-arbitrage model of the term structure in which any two futures rates act as factors. The term structure shifts and tilts as the factor rates vary. The cro...

Some students of futures markets believe that the volatility of futures prices increases as the futures contract nears maturity (see Telser, 1956; Segall, 1956; and Samuelson, 1965). Samuelson offers an explanation for the existence of the variability effect as reviewed in Section 1 of the paper. His hypothesis about the behavior of futures prices requires that the stochastic process characteri...

This paper examines the convexity bias introduced by pricing interest rate swaps off the Eurocurrency futures curve and the market's adjustment of this bias in prices over time. The convexity bias arises because of the difference between a futures contract and a forward contract on interest rates, since the payoff to the latter is non-linear in interest rates. Using daily data from 1987-1996, t...