✦ LIBER ✦

The pricing of stock index futures spreads at contract expiration

✍ Scribed by Alex Frino; Michael D. McKenzie

Publisher: John Wiley and Sons
Year: 2002
Tongue: English
Weight: 150 KB
Volume: 22
Category: Article
ISSN: 0270-7314
DOI: 10.1002/fut.10013

No coin nor oath required. For personal study only.

✦ Synopsis

Abstract

This paper conducts an empirical analysis of the mispricing of calendar spreads for stock index futures.
Using recent data drawn from the Sydney Futures Exchange, a sharp increase in the magnitude of spread mispricing
immediately prior to maturity of the near contract is documented. This pattern in mispricing is related to a
sharp decline in open interest in the near contract and an increase in open interest in the deferred contract.
Further, the direction of mispricing of the near and deferred contracts are more likely to move in opposite
directions as the near contract approaches maturity. These findings are consistent with the hypothesis that
traders seeking to roll‐over their positions from near to deferred futures contracts close to maturity
increase the magnitude of spread mispricing. © 2002 Wiley Periodicals, Inc. Jrl Fut Mark 22:451–469,
2002

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