✦ LIBER ✦

Short selling, unwinding, and mispricing

✍ Scribed by Kempf, Alexander

Book ID: 101222904
Publisher: John Wiley and Sons
Year: 1998
Tongue: English
Weight: 247 KB
Volume: 18
Category: Article
ISSN: 0270-7314
DOI: 10.1002/(sici)1096-9934(199812)18:8<903::aid-fut2>3.0.co;2-v

No coin nor oath required. For personal study only.

✦ Synopsis

This article highlights the impact of short selling restrictions and early unwinding opportunities on the relation between futures and spot prices. Within a multiperiod equilibrium model, the influence of optimal arbitrage trading on the mispricing is analyzed. Results concerning trade volume and level, mean reversion, and path dependence of the mispricing are provided. The empirical evidence suggests that short selling restrictions and early unwinding opportunities are influential factors for the mispricing behavior. They help explain empirical findings reported in the literature.

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