๐”– Bobbio Scriptorium
โœฆ   LIBER   โœฆ

An application of arbitrage pricing theory to futures markets: Tests of normal backwardation

โœ Scribed by Michael C. Ehrhardt; James V. Jordan; Ralph A. Walkling

Publisher
John Wiley and Sons
Year
1987
Tongue
English
Weight
780 KB
Volume
7
Category
Article
ISSN
0270-7314

No coin nor oath required. For personal study only.

โœฆ Synopsis

eynes (1923) and Hicks (1939), hypothesized that futures prices are downward biased estimates of expected spot prices. Any empirical study that employs returns on futures contracts is actually a joint test of both the Keynes-Hicks hypothesis and of the assumed model of returns. Models based on the Capital Asset Pricing Model have been used to test the hypothesis, with different models implying different conclusions. As shown in this article, these models are all special cases of a general linear model. Arbitrage Pricing Theory provides the most powerful test for this class of linear models. No other linear model will provide greater explanatory power or account for more systematic risk. An Arbitrage Pricing Theory model is estimated in this article and the results appear inconsistent with the Keynes-Hicks hypothesis.

๐Ÿ“œ SIMILAR VOLUMES

An intraday test of pricing and arbitrag
An intraday test of pricing and arbitrage opportunities in the New Zealand bank bill futures market
โœ Russell Poskitt ๐Ÿ“‚ Article ๐Ÿ“… 2002 ๐Ÿ› John Wiley and Sons ๐ŸŒ English โš– 223 KB ๐Ÿ‘ 2 views

## Abstract This paper examines pricing and arbitrage opportunities in the New Zealand bank bill futures market using an intraday data set. The key findings are: (a) the implied forward rate model yields biased estimates of the bill futures yield but the bias is small and not economically significa

Options on normal underlyings with an ap
Options on normal underlyings with an application to the pricing of survivor swaptions
โœ Paul Dawson; Kevin Dowd; Andrew J. G. Cairns; David Blake ๐Ÿ“‚ Article ๐Ÿ“… 2009 ๐Ÿ› John Wiley and Sons ๐ŸŒ English โš– 136 KB ๐Ÿ‘ 2 views

## Abstract Survivor derivatives are gaining considerable attention in both the academic and practitioner communities. Early trading in such products has generally been confined to products with linear payoffs, both funded (bonds) and unfunded (swaps). History suggests that successful linear payoff

Conditional correlation analysis of orde
Conditional correlation analysis of order statistics from bivariate normal distribution with an application to evaluating inventory effects in futures market
โœ Donald Lien; N. Balakrishnan ๐Ÿ“‚ Article ๐Ÿ“… 2003 ๐Ÿ› Elsevier Science ๐ŸŒ English โš– 207 KB

In this paper, we consider the order statistics from a bivariate normal distribution and develop a conditional correlation analysis. We then apply these results to evaluate the presence of inventory e ects in futures market. We also apply these results to analyze the data from a visual acuity experi

An empirical analysis of the delivery op
An empirical analysis of the delivery option, marking to market, and the pricing of treasury bond futures
โœ Simon Benninga; Michael Smirlock ๐Ÿ“‚ Article ๐Ÿ“… 1985 ๐Ÿ› John Wiley and Sons ๐ŸŒ English โš– 788 KB

ike many other futures contracts, the Treasury Bond (T-Bond) futures contract L allows the holder of a short position to satisfy the contract by delivering one of the variety of T-Bonds on one of a number of delivery dates. Accordingly, the traditional approach to pricing such contracts has concentr