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Risk premiums in financial futures markets: The case of treasury bond futures

โœ Scribed by Mark S. Rzepczynski

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

No coin nor oath required. For personal study only.

โœฆ Synopsis

More specifically, futures prices may influence storage and inventory decisions and may exact an important influence on production decisions. This is their price discovery function. Futures markets are seen as an efficient collector, processor, and disseminator of information.

'The large number of studies conducted on this issue are too numerous to individually examine: however, a few are: Poole (1978), Capozza andCornell (1979). Rendleman andCarabini (1979), andChow andBrophy (1982). All of these arbitrage studies compare the returns of a short-term Treasury bill or bond with returns to a strategy of buying a long-term Treasury bill or bond and selling a short futures contract.

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F evaluate the economic benefits of futures markets is to examine their effects on the intertemporal allocation of resources. This issue was studied by DeCanio (1980) and Stein (1981Stein ( , 1986) ) who showed that the economic benefits of futures trading can be measured by the ex-post welfare loss