Journal of Futures Markets

- Publisher:
- Wiley
- Publication date:
- 2021-03-29
- ISBN:
- 0270-7314
Issue Number
- Nbr. 39-9, September 2019
- Nbr. 39-8, August 2019
- Nbr. 39-7, July 2019
- Nbr. 39-6, June 2019
- Nbr. 39-5, May 2019
- Nbr. 39-4, April 2019
- Nbr. 39-3, March 2019
- Nbr. 39-2, February 2019
- Nbr. 39-1, January 2019
- Nbr. 38-12, December 2018
- Nbr. 38-11, November 2018
- Nbr. 38-10, October 2018
- Nbr. 38-9, September 2018
- Nbr. 38-8, August 2018
- Nbr. 38-7, July 2018
- Nbr. 38-6, June 2018
- Nbr. 38-5, May 2018
- Nbr. 38-4, April 2018
- Nbr. 38-3, March 2018
- Nbr. 38-2, February 2018
Latest documents
- Price discovery in commodity derivatives: Speculation or hedging?
We investigate whether commodity futures or options markets play a more important role in the price discovery process in the six most actively traded markets: crude oil, natural gas, gold, silver, corn, and soybeans. Using new information leadership techniques, we report new evidence and report that both markets make a meaningful contribution to price discovery in recent times; however, on average, options lead futures in reflecting new information for a majority of these commodities. We find that increased speculation, rather than hedging activity, in commodity derivatives is a key determinant of price discovery in the options markets.
- Journal of Futures Markets: Volume 39, Number 9, September 2019
- Robust estimation of risk‐neutral moments
This study provides an in‐depth analysis of how to estimate risk‐neutral moments robustly. A simulation and an empirical study show that estimating risk‐neutral moments presents a trade‐off between (a) the bias of estimates caused by a limited strike price domain and (b) the variance of estimates induced by microstructural noise. The best trade‐off is offered by option‐implied quantile moments estimated from a volatility surface interpolated with a local‐linear kernel regression and extrapolated linearly. A similarly good trade‐off is achieved by estimating regular central option‐implied moments from a volatility surface interpolated with a cubic smoothing spline and flat extrapolation.
- Derivatives pricing when supply and demand matter: Evidence from the term structure of VIX futures
We decompose the VIX futures term structure into systematic components driving the VIX and idiosyncratic components reflecting demand by various types of futures end‐users. We model two distinct channels by which trading activity manifests itself into futures prices: a contemporaneous “level effect” across the term structure due to the aggregate size of nondealer net demand and a mean‐reverting “roll effect” due to large trades in specific contracts. The observed futures term structure was, on average, higher and steeper than it would have been in the absence of the observed nondealer demand, but the impact varies in sign and magnitude over time.
- Panel quantile regressions for estimating and predicting the value‐at‐risk of commodities
Using a flexible panel quantile regression framework, we show how the future conditional quantiles of commodities returns depend on both ex post and ex ante uncertainty. Empirical analysis of the most liquid commodities covering main sectors, including energy, food, agriculture, and precious and industrial metals, reveal several important stylized facts. We document common patterns of the dependence between future quantile returns and ex post as well as ex ante volatilities. We further show that the conditional returns distribution is platykurtic. The approach can serve as a useful risk management tool for investors interested in commodity futures contracts.
- The evolution of price discovery in us equity and derivatives markets
This study considers the evolution of price discovery in the S&P 500 E‐mini futures and the corresponding exchange traded fund (SPY ETF) over the period January 2002 through December 2013. The study reports evidence that the E‐mini futures dominate price discovery at the beginning of the sample period. However, from 2007 onward both the SPY ETF and E‐mini futures contribute similar portions to the price discovery process. The level of price discovery is significantly influenced by volume measures and relative levels of transaction costs for both securities.
- Is options trading informed? Evidence from credit rating change announcements
Using a sample of proactive credit rating changes, this study examines the information content of options trading before news events. Pre‐event informed options trading predicts cumulative abnormal returns around credit rating change announcements. The predictability of options trading is more pronounced before announcements of more severe and surprising rating changes. Moreover, the information content of pre‐event options trading is greater when the pre‐event underlying stock market is less informational, when the options market is more liquid, and in the post–regulation fair disclosure period. Overall results are consistent with informed options trading before credit rating change announcements.
- Pricing executive stock options with averaging features under the Heston–Nandi GARCH model
In this paper, we focus on the pricing issue of four types of executive stock options (ESOs) in the Heston–Nandi generalized autoregressive conditional heteroskedasticity option pricing model. Based on the derived benchmark strike prices in the proposed framework, we obtain the closed‐form pricing formulae for four types of ESOs. In the numerical part, we investigate the sensitivity and cost efficiency of ESOs and suggest that systematic risk (stock β) and the fraction of wealth invested in restricted stock could impede the cost efficiency of ESOs.
- Editor's Note
- Journal of Futures Markets: Volume 39, Number 8, August 2019
Featured documents
- Derivatives pricing when supply and demand matter: Evidence from the term structure of VIX futures
We decompose the VIX futures term structure into systematic components driving the VIX and idiosyncratic components reflecting demand by various types of futures end‐users. We model two distinct channels by which trading activity manifests itself into futures prices: a contemporaneous “level effect”...
- Is options trading informed? Evidence from credit rating change announcements
Using a sample of proactive credit rating changes, this study examines the information content of options trading before news events. Pre‐event informed options trading predicts cumulative abnormal returns around credit rating change announcements. The predictability of options trading is more...
- Price discovery in commodity derivatives: Speculation or hedging?
We investigate whether commodity futures or options markets play a more important role in the price discovery process in the six most actively traded markets: crude oil, natural gas, gold, silver, corn, and soybeans. Using new information leadership techniques, we report new evidence and report...
- Do Seasonal Tropical Storm Forecasts Affect Crack Spread Prices?
Individual storms in the Gulf of Mexico have been shown to affect crack spread futures prices. As hurricanes strike refiner‐dense areas, prices of refined petroleum products rise. We find that crack spread prices are even affected by seasonal hurricane forecasts. We find this despite the...
- Jump risk and option liquidity in an incomplete market
This study investigates the effect of a jump risk on options’ bid–ask implied volatility (IMV) spreads. We introduce theoretical models assuming market makers encounter a Bernoulli‐type jump atnd optimize the mean‐variance utility by choosing the optimal hedging delta and price. We find, at a low...
- Volatility and correlation timing: The role of commodities
This paper examines the role of commodities from the perspective of dynamic asset allocation. We model conditional second moments of stock, bond, and commodity futures and examine their impact on the portfolio choice decision of a risk‐averse investor in a mean‐variance framework. Findings suggest...
- Do investors use options and futures to trade on different types of information? Evidence from an aggregate stock index
Option prices are sensitive to changes in volatility whereas futures prices are not. We investigate this distinction empirically and test the hypothesis that investors with information about future returns (volatilities) will prefer to trade in futures (options) because futures (options) protect...
- How Informed Investors Take Advantage of Negative Information in Options and Stock Markets
We examine whether and how investors establish positions in options when they have negative information in the U.S. markets from August 2004 to January 2009. Our empirical results show that options seem to be actively and effectively used for the exploitation of negative information. General...
- Order Aggressiveness, Trading Patience, and Trader Types in a Limit Order Market
This study examines the order aggressiveness and trading patience of foreign institutional traders, futures proprietary firm traders, individual day and non‐day traders in the Taiwan index futures market. We consider order choice given a completely transparent limit order book. Our empirical...
- An Empirical Analysis of the Dynamic Probability of Informed Institutional Trading: Evidence from the Taiwan Futures Exchange
Based upon a unique dataset of institutional transactions in the Taiwan index futures market, we analyze the informational role of institutional investors using the “dynamic probability of informed trading” (DPIN). Compared to “trading imbalances” (TIB) and the “volume‐synchronized probability of...