This paper assesses how market fundamentals affect asset return volatility by drawing on evidence from the U.S. natural gas futures market. One of the novel features of this paper is the use of the deviation of temperatures from normal (weather surprise) as a proxy for demand shocks and a determinant of the conditional volatility of natural gas futures returns. I estimate a GARCH model using da...

The operation of futures exchanges and the trading on the fl oor is hard to be interpreted without knowing the actors’ main motivations. For the solution of this problem a lot of information is provided by theories aimed at revealing the motives of hedge deals having gained acknowledgment in the international special literature, whose short introduction in this paper is followed by the setting ...

The central part of pricing agricultural commodity futures options is to find appropriate stochastic process of the underlying assets. The Black’s (1976) futures option pricing model laid the foundation for a new era of futures option valuation theory. The geometric Brownian motion assumption girding the Black’s model, however, has been regarded as unrealistic in numerous empirical studies. Opt...

This paper describes the regulated agricultural commodity futures market of China, focusing on six actively traded futures: corn, strong gluten wheat, No. 1 soybean, soymeal, cotton, and white sugar. A novel skew Ornstein-Uhlenbeck model is employed to characterize price dynamics with government controls. The empirical analysis reveals significant phenomena in these indicates that are influence...

This research applies a market profile to establish an indicator to classify the correlation between the variation in price and value with the stock trends. The indicator and technical index are neural network architecture parameters that assist to extrapolate the market logic and knowledge rules that influence the TAIEX futures market structure via an integral assessment of physical quantities...

We analyze mean-variance-optimal dynamic hedging strategies in oil futures for oil producers and consumers. In a model for the oil spot and futures market with Gaussian convenience yield curves and a stochastic market price of risk, we find analytical solutions for the optimal trading strategies. An implementation of our strategies in an out-of-sample test on market data shows that the hedging ...

This study proposes a hybrid model, which combines GARCH and Neural Network, for estimating VAR in Nasdaq 100 and Dow Jones futures index market. Empirical results demonstrated that the hybrid method has certain outperformed the conventional method (historical simulation, variance/covariance and the Monte Carlo simulation) in estimating VAR. In terms of accuracy, the hybrid method is superior t...

a r t i c l e i n f o JEL classification: C13 C32 G14 Keywords: Futures price Spot price Chinese commodity market Frequency domain approach Garbade–Silber Model This paper presents the causal relationships between futures and spot prices of six metal and agriculture commodities in Chinese commodity market, using GC test, frequency domain approach proposed by Brietung and Candelon (2006) and Gar...

Managing price risk with futures contracts creates liquidity risk through marking to market. Liquidity risk matters in an imperfect capital market where interim losses on a futures position have to be financed at a borrowing rate that is higher than the risk-free rate. However, the impact of liquidity risk can be mitigated using options on futures. This paper analyzes the optimal risk managemen...

This study is concerned with the aggregation of information in stock index cash and futures markets. The efficient price discovery is analyzed with reference to the error correction representation and to the common trend representation of cointegrated variables. The empirical evidence is based on three month of intraday data on the French CAC 40 index. The results indicate that deviations from ...