The standard approaches to estimating minimum variance hedge ratios (MVHRs) are mis-specified when futures prices are subject to price limits. This paper proposes a bivariate tobit-FIGARCH model with maturity effects to estimate dynamic MVHRs using single and multiple period approaches. Simulations and an application to a commodity futures hedge support the proposed approach and highlight the i...

I study price competition in settings where end products are combinations of components supplied by different monopolists, nesting standard models of perfect complements and imperfect substitutes. I show sufficient conditions for a discrete-choice demand system to yield demand for each product which is logconcave in price, and has log-increasing differences in own and another product’s price, l...

This paper analyzes the relationship between currency price changes and their expectations. Currency price change expectations are derived with the help of different order flow measures, from the trading behavior of investors on OANDA FXTrade, which is an internet trading platform in the foreign exchange market. We investigate whether forecasts of intra-day price changes on different sampling f...

e xchange rate is an important factor influencing price indices of exported goods of a country in different ways. imported intermediate commodity is one of the important ways by which the change in exchange rate affects price indices of the exported goods. using the input-output table of iran for the year 2001, this paper investigates the impact of exchange rate devaluation on price indices of ...

Within the private-values paradigm, we construct a tractable empirical model of equilibrium behaviour at first-price auctions when bidders’ valuations are potentially dependent, but not necessarily affiliated. We develop a test of affiliation and apply our framework to data from low-price, sealed-bid auctions held by the Department of Transportation in the State of Michigan to procure road-resu...

This paper proposes a consistent approach to discrete time valuation in insurance and finance. This approach uses the growth optimal portfolio as reference unit or benchmark. When used as benchmark, it is shown that all benchmarked price processes are supermartingales. Benchmarked fair price processes are characterized as martingales. No measure transformation is needed for the fair pricing of ...

The present paper accomplishes a major step towards a reconciliation of two conflicting approaches in mathematical finance: on the one hand, the mainstream approach based on the notion of no arbitrage (Black, Merton & Scholes); and on the other hand, the consideration of non-semimartingale price processes, the archetype of which being fractional Brownian motion (Mandelbrot). Imposing (arbitrari...

The seminal work of Engel (1999) establishes a method for measuring the contributions of traded goods and nontraded goods to the fluctuation of real exchange rates. Two difficulties arise: the assumed price aggregation is likely biased, and the needed data on non-traded goods price is often limited. The present work overcomes these difficulties, as follows. First we generalize Engel’s exchange ...

This paper examines the effect of the volatility of oil prices on food price in South Africa using monthly data covering the period 2002:01 to 2014:09. Food price is measured by the South African consumer price index for food while oil price is proxied by the Brent crude oil. The study employs the GARCH-in-mean VAR model, which allows the investigation of the effect of a negative and positive s...

This paper presents a model in which a firm attempts to gain market power by pricing above the competitive market price and simply trying to persuade illinformed consumers not to search for other lower priced firms. Fictitious price comparisons, or false sale signs could be used in this way to deceptively and profitably deter consumer search. A simplified model shows how this mechanism could ex...