We derive a general formula for the futures price process without the restriction that the assets used in the future margin account are continuous and of finite variation. To do so, we model tradeable securities with dividends which are not necessarily cash dividends at fixed times or continuously paid dividends. A future contract can then be modelled as an asset which pays dividends but has ze...

This paper highlights the previously neglected role of the futures markets in US Treasury price discovery. The estimates of 5and 10-year GovPX spot market information shares typically fail to reach 50% from 1999 on. The GovPX information shares for the 2-year contract are higher than those of the 5and 10-year maturities but also decline after 1998. Relative bid-ask spreads, number of trades, an...

Futures exchanges require a margin requirement that ensures their competitiveness and protects against default risk. This paper applies extreme value theory in computing unconditional optimal margin levels for a selection of stock index futures traded on European exchanges. The theoretical framework focuses explicitly on tail returns, thereby properly accounting for large levels of risk in meas...

Following the evolvement of technology in the trading and reporting systems of financial markets in the recent past, the abundance of high frequency data made available for analysis has opened up the scope for more insightful research work on the intra day behaviour of financial market data. Using high frequency intra day data from 1 January 2004 to 31 December 2004, this paper examines the pat...

This paper develops a new multivariate Markov regime switching model that incorporates long memory in the volatility process. The research extends the Generalized Regime Switching (GRS) framework developed by Gray (1996) to the Bivariate case using a Fractionally Integrated GARCH process with constant correlation (B-RS_FIGARCH). The model is applied to estimate dynamic minimum variance hedge ra...

Both the UK spot and futures markets in short term interest rates are found to react strongly to surprises in the scheduled announcements of the repo rate and RPI. Therefore these announcements should also affect the market for options on short term interest rates. Because the repo rate and RPI announcements are scheduled, the options market can predict the days on which announcement shocks may...

We study the contemporaneous and intertemporal partial relation between T-bond pricing and changes in equity risk, as measured by the implied volatility from equity-index options. Our 1992 to 2007 sample is attractive because of the modest inflation risk and sizable time-series variability in equity risk. Over 1997 to 2007 and for inclusive one-half and one-quarter subperiods, we find that the ...

Disclaimer Any opinions expressed here are those of the author(s) and not those of the IIIS. All works posted here are owned and copyrighted by the author(s). Papers may only be downloaded for personal use only. Abstract: We investigate the volatility structure of gold, trading as a futures contract on the Chicago Board of Trade (CBOT) using intraday (high frequency) data from January 1999 to D...

Chinese commodity futures markets have become some of the most important derivative markets worldwide. This paper studies the optimal hedge ratios on two popular contracts in China, soybeans and copper, by employing copula functions. Our empirical results suggest that the proposed copula hedging strategy outperforms the simple regression method and dynamic conditional correlation (DCC) method b...