settlement tax and non synchronous effects in the basis of u k stock index futures abstract the basis in stock index futures markets is analytically and empirically studied in this paper within a no arbitrage cost of carry framework explanatory power improved when the implications of the u k stock exchange settlement system were introduced into the modelling process and until recently with the maturity of the market evidence indicating the presence of non synchronicities between the cash and futures markets was found strong evidence for tax effects upon the basis was not found to be present in the data analysed statistically significant relationships between basis mispricing and volume and volatility were found

financial futures hedging via goal programming this paper presents multiperiod multiple objective goal programming as an alternative to the more conventional hedge ratio approaches to financial futures hedging the described model offers the potential benefits of i simultaneous achievement of multiple hedge related objectives i e minimization of transactions and margin opportunity costs regulation of cash flow and maximization of profits accruing from both the cash and futures positions and ii periodic modification and updating of the futures position as suggested by actual observed prices and interest rates throughout the hedging period to assess its overall effectiveness the model was applied to develop appropriate hedging strategies for three separate time periods each representing a unique interest rate trend i e upward movement downward movement and no change since real world implementation of the model requires the use of forecast data independent forecasts of both cash and futures prices were generated via 1 moving average 2 exponential smoothing and 3 random walk techniques in progressing through each of the 13 week time periods all forecasts were updated with the previous weeks actual price data revised forecasts and actual price data were then incorporated into the model constraints on a weekly schedule this approach in essence provided weekly futures activity recommendations based on the most recent price and interest rate developments observed at any point during the hedging period the realized gains or losses were then compared to the previously derived perfect foresight model results and to the traditional hedge ratio results this allowed for evaluation of the model s effectiveness under varying forecast methods and varying interest rate trends the results show that the goal programming model outperformed other strategies in most cases

wage stagnation rising inequality and the financial crisis of 2008 the most widely embraced explanations of the financial crisis of 2008 have centered upon inadequate regulation stemming from laissez faire ideology combined with low interest rates although these widely acknowledged causal factors are true beneath them lie deeper determining forces that have received less notice wage stagnation and a dramatic increase in inequality in the u s over the preceding 35 years wage stagnation and heightened inequality generated three dynamics that made the economy vulnerable to systemic dysfunction the first is that they constrained consumption reducing profitable investment potential in the real economy and thereby encouraging an every wealthier elite to flood financial markets with credit helping keep interest rates low encouraging the creation of new credit instruments and greater indebtedness and fueling speculation the second dynamic is that consumption externalities were generated forcing individuals to struggle harder to find ways to maintain the welfare of their families and maintain their relative social status the consequence was that over the preceding three decades household saving rates plummeted households took on ever greater debt and worked longer hours the third dynamic is that as the rich took larger shares of income and wealth they gained more command over ideology and hence politics reducing the size of government cutting taxes on the rich and reducing welfare for the poor deregulating the economy and failing to regulate newly evolving credit instruments flowed out of this ideology

currency and credit markets abstract in this paper we focus on two aspects of the relationship between exchange rates and interest rates which have not been widely discussed first the extent to which the forward premia discount in one market can be used to predict the speculative return in the other second the extent to which unanticipated changes in the speculative returns are correlated across markets so that positions in one market can be hedged using positions in the other our results demonstrate that these two linkages are also important factors behind the time variation in speculative risk premia

the minimum variance hedge ratio under stochastic interest rates in an environment where interest rates are stochastic we examine the case of a pure hedger endowed with a fixed position in a long term bond in contrast to conventional wisdom according to which the difference between hedging through forward contracts and futures is immaterial it turns out that the minimum variance hedge ratio using forwards comprises two terms instead of one only when using futures the magnitude of the difference between the two hedge ratios may be important under some plausible assumptions this result is due to the presence of additional interest rate risk that bears on the profit and loss statement associated with the forward position this sheds some additional light on the respective features of forward and futures contracts written on interest rate sensitive securities

stochastic convenience yield and the pricing of oil contingent claims this paper develops and empirically tests a two factor model for pricing financial and real assets contingent on the price of oil the factors are the spot price of oil and the instantaneous convenience yield the parameters of the model are estimated using weekly oil futures contract prices from january 1984 to november 1988 and the model s performance is assessed out of sample by valuing futures contracts over the period november 1988 to may 1989 finally the model is applied to determine the present values of one barrel of oil deliverable in one to ten years time

implicit delivery options and optimal delivery strategies for financial futures contracts abstract futures contract specification usually allow the short position some variation as to when where how much and what is to be delivered in this paper we derive the optimal delivery policy for the treasury bond futures contracts and find that our policy produces profits that are positive and statistically significant this indicates that future prices are too high in that the short position can earn profits by skillfully exercising his delivery options we find the actual delivery policies of market participants depart substantially from the optimal strategy the implications of these findings for futures traders and bond dealers are discussed

modelling electric vehicle usage intentions an empirical study in malaysia in the new global economy carbon emission has become an important worldwide issue one key reason for this is the magnification of the transport sector as millions of gasoline based vehicles are plying on roads producing carbon emission throughout day and night in order to impede these vulnerabilities and promote a more sustainable economy one solution is to switch from gasoline based vehicles to using green technology vehicles there is growing agreement that electrification and the ability to decarbonize this sector seems to be significant as it helps to mitigate the high reliance on fossil fuels and reduce carbon emissions the introduction of electric vehicles has led the automotive industry to a whole new echelon one with zero fuel dependency and increased fuel efficiency while the usage of greener and cleaner vehicles such as electric vehicles is well supported with government policies and programmes it is surprising that little information is divulged about the public acceptance of electric vehicles from the social perspective public acceptance and diffusion of this new green technology is relatively fresh and unknown in malaysia in fact public acceptance can appear as a prevailing obstacle for market diffusion and encumber the development of technology adoption the rationale of this paper is to conduct an exploration to determine the key predictors affecting the usage of electric vehicles acceptance in malaysia malaysia has been referred to here as electric vehicles are just being introduced as one of the initiatives to encourage a low fossil carbon technology within the transportation sector more specifically an empirical study using a survey questionnaire was distributed to 1000 private vehicle drivers in malaysia an electric vehicle usage model was proposed based on a literature review and a multiple regression model the results demonstrated that electric vehicles acceptance in malaysia can be explained as being significantly related to social influences performance attributes financial benefits environmental concerns demographics infrastructure readiness and government interventions in addition the study offers a valuable wealth of information on the public acceptance of automotive players planning to market electric vehicles in malaysia it also offers sensible guidelines for the formulation of marketing strategies that will address the real wants and needs of future electric vehicles users in the meanwhile policy makers should concentrate on the appropriate intervention and policy to encourage the development of electric vehicles as part of the strategy towards a transition to a low carbon society in malaysia

climate change financial stability and monetary policy using a stock flow fund ecological macroeconomic model we analyse i the effects of climate change on financial stability and ii the financial and global warming implications of a green qe programme emphasis is placed on the impact of climate change damages on the price of financial assets and the financial position of firms and banks the model is estimated and calibrated using global data and simulations are conducted for the period 2015 2115 four key results arise first by destroying the capital of firms and reducing their profitability climate change is likely to gradually deteriorate the liquidity of firms leading to a higher rate of default that could harm both the financial and the non financial corporate sector second climate change damages can lead to a portfolio reallocation that can cause a gradual decline in the price of corporate bonds third financial instability might adversely affect credit expansion and the investment in green capital with adverse feedback effects on climate change fourth the implementation of a green qe programme can reduce climate induced financial instability and restrict global warming the effectiveness of this programme depends positively on the responsiveness of green investment to changes in bond yields

u s treasury bill forward and futures prices for the period 1976 87 forward rates on u s t bills averaged more than 30 basis points above the comparable futures market rates since risk is common to both rates i argue that this difference can be explained by the substitutability of different maturity t bills for money consistent with this hypothesis i find that this difference depends positively on interest rates and the spread between the federal funds and 3 month t bill rates and negatively on the ratio of short term governments to broadly defined money also significant shifts occurred in the relationship in october 1979 and august 1982 coinciding with changes in federal reserve operating procedures copyright 1994 by ohio state university press

soybean inventory and forward curve dynamics we present two results concerning soybean prices first we exhibit a simple relationship between stocks and price volatility the observation of an increasing price volatility with decreasing inventory is often mentioned in the literature but has so far been documented using a proxy for inventory see fama and french 1987 1988 litzenberger and rabinowitz 1995 instead we reconstruct a yearly quarterly and monthly database of worldwide soybean inventories using aggregate data from the united states brazil and argentina we show that under all time scales price volatility is an increasing linear function of inverse inventory which we term scarcity second we show how the addition of the factor scarcity in a state variable approach to the dynamics of the term structure of soybean forward prices improves the quality of the fit we document this property on a 25 year database of cbot futures contracts and show that the superior accuracy also affects long maturity futures contracts an important property for the valuation of long term origination contracts between producing countries and the agrifood industry

accuracy of forward freight agreements in forecasting future freight rates abstractparticipants in the maritime industry place much interest in the forward freight agreements ffa ffas being an indispensable tool for hedging shipping freight risk our article innovates by directly comparing the ffa predictions with their actual future settlement prices as well as by examining contracts going forward as far as next calendar year we combine straightforward comparison measurements with cointegration analysis to test for the accuracy and efficiency of the ffa projections we find that ffas display limited usefulness in predicting future freights only slightly superior than simple naive models the shorter the contract period and the smaller the vessel the better the forecast we also find ffas being relatively good predictors of future market direction but missing the turning points of the market cycles

a natural experiment in monetary policy covering three episodes of growth and decline in the economy and the stock market the third of three episodes in a major natural experiment in monetary policy that started more than 80 years ago is just now coming to an end the experiment consists in observing the effect on the economy and the stock market of the monetary policies followed during and after three very similar periods of rapid economic growth in response to rapid technological change the booms of the 1920s in the united states the 1980s in japan and the 1990s in the united states in this experiment the quantity of money is the counterpart of the experimenter s input the performance of the economy and the level of the stock market are the counterpart of the experimenter s output the results of this natural experiment are clear at least for major ups and downs what happens to the quantity of money has a determinative effect on what happens to national income and to stock prices the results strongly support anna schwartz s and my 1963 conjecture about the role of monetary policy in the great contraction they also support the view that monetary policy deserves much credit for the mildness of the recession that followed the collapse of the u s boom in late 2000

an empirical analysis of implicit delivery options in the treasury bond futures contract abstract assuming perfect frictionless and efficient markets this paper develops a framework to estimate the composite value of the quality wild card and end of month options implicit in the t bond futures contract the value of delivery options is shown to be the excess of forward price of the cheapest bond over its conversion factor times the exercise price of futures contract empirical results indicate that the option values over the last quarter of the nearby contract are on average less than 0 5 percent of the mean futures price which is substantially lower than the value reported by previous studies further scrutiny reveals that although the empirical estimates are contaminated by non synchronous bond data they are consistent with certain known theoretical properties of option values

exact solutions for futures and european futures options on pure discount bonds this paper provides closed form solutions for futures and european futures options on pure discount bonds under the ornstein uhlenbeck normal process a significant difference between black s model 1976 and the model in this paper for futures options is discussed

continuous time methods in finance a review and an assessment i survey and assess the development of continuous time methods in finance during the last 30 years the subperiod 1969 to 1980 saw a dizzying pace of development with seminal ideas in derivatives securities pricing term structure theory asset pricing and optimal consumption and portfolio choices during the period 1981 to 1999 the theory has been extended and modified to better explain empirical regularities in various subfields of finance this latter subperiod has seen significant progress in econometric theory computational and estimation methods to test and implement continuous time models capital market frictions and bargaining issues are being increasingly incorporated in continuous time theory the roots of modern continuous time methods in finance can be traced back to the seminal contributions of merton 1969 1971 1973b in the late 1960s and early 1970s merton 1969 pioneered the use of continuous time modeling in financial economics by formulating the intertemporal consumption and portfolio choice problem of an investor in a stochastic dynamic programming setting merton 1973b also showed how such a framework can be used to develop equilibrium asset pricing implications thereby significantly extending the asset pricing theory to richer dynamic settings and expanding the scope of applications of continuous time methods to study problems in financial economics 1 within a span of about 30 years from the publication of merton s inf luential papers continuous time methods have become an integral part of financial economics indeed in certain core areas in finance such as e g asset pricing derivatives valuation term structure theory and portfolio selection continuoustime methods have proved to be the most attractive way to conduct research and gain economic intuition the continuous time approach in these areas has produced models with a rich variety of testable implications the econometric theory for testing continuous time models has made rapid strides in the last decade and has thus kept pace with the impressive progress on the theoretical front one hopes that the actual empirical investigations and estimation using the new procedures will follow suit soon

a synthetic stock flow consistent macroeconomic model of financialisation this article is centred around the notions of shareholder value orientation and financialisation shareholder value orientation is reflected by a high dividend payout ratio applied by firms and the reluctance of firms to finance physical investment via new equity issues financialisation is the more general development towards an increased importance of the financial sector of the economy relative to the non financial sector in this article a synthetic stock flow consistent model is developed that attempts to encompass some important recent works on the effects of financialisation this includes contributions from the fields of mainstream information economics and post keynesian economics we conduct simulations reflecting increased shareholder value orientation and show that the results are consistent with important stylised facts copyright the author 2008 published by oxford university press on behalf of the cambridge political economy society all rights reserved oxford university press

introduction the global financial crisis there cannot now be a shadow of a doubt that the flaw in his ideology admitted by alan greenspan in response to a question by henry a waxman chairman of the us house of representatives committee on oversight and government reform whether he felt that your ideology pushed you to make decisions that you wish you had not made is both significant and permanent the current financial and economic crisis that has forced the likes of greenspan to question the coherence of dominant conceptual frameworks is unprecedented in global reach and systemic gravity some basic figures speak for themselves according to mckinsey s mapping global financial markets october 2008 global financial assets rose from us 12 trillion in 1980 to us 196 trillion in 2007 the international monetary fund s global financial stability report imf 2009a estimate for the latter figure is considerably higher at us 241 trillion global cross border capital flows more than doubled between 2002 and 2007 with foreign investors holding one in four debt securities and one in five equities while in 2000 only 11 countries had financial assets of more than 350 of gross domestic product gdp 25 countries had deepened their financial markets to the same extent by 2007 as early as 1990 money managers had increased their control of us corporate equities from 8 in 1950 to 60 porter 1992 p 6 whalen 2002 p 402 similarly pension funds had extended their share of total business equities from less than 1 to just short of 39 and their fraction of corporate debt from 13 to 50 ghilarducci 1992 p 117 whalen 2002 p 402 in the period from 1986 to 2006 the us financial sector as a whole increased its share of corporate profits from 10 to 30 while its outstanding debts grew from 20 of gdp in 1980 to 116 in 2007 fed 2009 according to gillian tett from the financial times outstanding credit defaults swaps cds today amount to no less than us 60 trillion with the risk embodied after discounting mutually off setting contracts still as high as us 14 trillion tett 2009 p 264 as we know the curtains have now come down on this dance of the trillions palma 2009 the immediate hang over in the form of a pile of toxic debt is surreal not only in its

the double bubble at the turn of the century technological roots and structural implications this paper argues that the two boom and bust episodes of the turn of the century the internet mania and crash of the 1990s and the easy liquidity boom and bust of the 2000s are two distinct components of a single structural phenomenon they are essentially the equivalent of 1929 developed in two stages one centred on technological innovation the other on financial innovation hence the frequent references to that crash to the 1930s and to bretton woods are not simple journalistic metaphors for interpreting the credit crunch and its solution but rather the intuitive recognition of a fundamental similarity between those events and the current ones the paper holds that such major boom and bust episodes are endogenous to the way in which the market economy evolves and assimilates successive technological revolutions it will discuss why it occurred in two bubbles on this occasion it examines the differences and continuities between the two episodes and presents an interpretation of their nature and consequences

a continuous time equilibrium model of forward prices and futures prices in a multigood economy abstract this paper is a theoretical investigation of equilibrium forward and futures prices we construct a rational expectations model in continuous time of a multigood identical consumer economy with constant stochastic returns to scale production using this model we find three main results first we find formulas for equilibrium forward futures discount bond commodity bond and commodity option prices second we show that a futures price is actually a forward price for the delivery of a random number of units of a good the random number is the return earned from continuous reinvestment in instantaneously riskless bonds until maturity of the futures contract third we find and interpret conditions under which normal backwardation or contango is found in forward or futures prices these conditions reflect the usefulness of forward and futures contracts as consumption hedges

testing the martingale hypothesis in deutsche mark futures with models specifying the form of heteroscedasticity summary we examine the form of heteroscedasticity in deutsche mark futures price data and compare different specifications of the particular way that the variance is changing over time the martingale hypothesis is tested with daily and weekly rates of change of futures prices for the deutsche mark and some evidence is found against this hypothesis in analyses of daily data from 1981 to 1985 this rejection of the martingale hypothesis may be attributed to trading day effects in foreign currency prices and the resulting day of the week patterns in futures prices when the martingale hypothesis is tested with weekly data the null hypothesis is retained

a further analysis of the lead lag relationship between the cash market and stock index futures market the intraday lead lag relation between returns of the major market cash index and returns of the major market index futures and s p 500 futures is investigated empirical results show strong evidence that the futures leads the cash index and weak evidence that the cash index leads the futures the asymmetric lead lag relation holds between the futures and all component stocks including those that trade in almost every five minute interval evidence indicates that when more stocks move together market wide information the futures leads the cash index to a greater degree this suggests that the futures market is the main source of market wide information article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

green expectations current effects of anticipated carbon pricing i report evidence that an anticipated strengthening of environmental policy increased emissions i find that the breakdown of the u s senate s 2010 climate effort generated positive excess returns

impact of experience on government policy toward acceptance of hydrogen fuel cell vehicles in korea abstract as the low carbon green growth agenda which emphasized sustainable development through equilibrium between economic growth and environmental preservation is propagated rapidly in korea despite this progress it is not uncommon for new products made through advanced technologies such as hydrogen fuel cell vehicles to face public skepticism preventing market penetration therefore the factors impacting customer acceptance of hydrogen fuel cell vehicles have to be estimated furthermore it is necessary to examine whether or not the policies related to these products can prevent public skepticism regarding them this empirical study examining the relationship between personal experiences related to the policy and acceptance of the innovative products of hydrogen fuel cell vehicles shows that government involvement in technology targeting and promotions administered by the low carbon green growth agenda rarely stimulate potential customers purchase intentions thus technology targeting administered by the low carbon green growth agenda needs to be reconciled with customer responses to the future market

the revenge of the market on the rentiers why neo liberal reports of the end of history turned out to be premature starting from the perspective of heterodox keynesian minskyian kindlebergian financial economics this paper begins by highlighting a number of mechanisms that contributed to the current financial crisis these include excess liquidity income polarisation conflicts between financial and productive capital lack of appropriate regulation asymmetric information principal agent dilemmas and bounded rationalities however the paper then proceeds to argue that perhaps more than ever the macroeconomics that led to this crisis only makes analytical sense if examined within the framework of the political settlements and distributional outcomes in which it had operated taking the perspective of critical social theories the paper concludes that ultimately the current financial crisis is the outcome of something much more systemic namely an attempt to use neo liberalism or in us terms neo conservatism as a new technology of power to help transform capitalism into a rentiers delight in particular into a system without compulsions on big business i e one that imposes only minimal pressures on big agents to engage in competitive struggles in the real economy while doing the opposite to workers and small firms a key component in the effectiveness of this new technology of power was its ability to transform the state into a major facilitator of the ever increasing rent seeking practices of oligopolistic capital the architects of this experiment include some capitalist groups in particular rentiers from the financial sector as well as capitalists from the mature and most polluting industries of the preceding techno economic paradigm some political groups as well as intellectual networks with their allies including many economists and the new left although rentiers did succeed in their attempt to get rid of practically all fetters on their greed in the end the crisis materialised when markets took their inevitable revenge on the rentiers by calling their blatant bluff

stock index futures mispricing profit opportunities or risk premia this paper reports empirical evidence on stock index futures pricing based on about four years of synchronous hourly data from the uk reported index values are based on firm quotes identified arbitrage opportunities are therefore actually exploitable and economically significant the analysis controls for cash market settlement procedures the results show that ex ante trading rules would have generated attractive profits after transaction costs and after the risks of dividend uncertainties marking to market and possible delays in execution are considered the far contract and the near contract tend to be mispriced in the same direction the mild tendency of futures to be overpriced in rising markets and underpriced in falling markets appears to be unimportant finally significant positive relationships are observed between the absolute magnitude of mispricing and time to maturity and between mispricing and index option implied volatility

forward contracts and futures contracts abstract this paper provides a detailed discussion of the similarities and differences between forward contracts and futures contracts under frictionless markets and continuous trading simple arbitrage arguments are invoked to value forward contracts to relate forward prices and spot prices and to relate forward prices and futures prices we also argue that forward prices need not equal futures prices unless default free interest rates are deterministic

efficiency tests in the french derivatives market abstract the french derivatives market the marche a terme international de france matif or the french international futures and options exchange is one of the major derivatives markets in the world the efficiency of four financial contracts traded on the matif cac40 index futures ecu bond futures national bond futures and pibor 3 month futures are examined in this paper test results from serial correlations unit root tests and variance ratio tests provide overwhelming evidence that the random walk hypothesis cannot be rejected for these contracts

exploiting the conditional density in estimating the term structure an application to the cox ingersoll and ross model we propose an empirical method that utilizes the conditional density of the state variables to estimate and test a term structure model with known price formulae using data on both discount and coupon bonds the method is applied to an extension of a two factor model due to cox ingersoll and ross 1985 cir our results show that estimates based on only bills imply unreasonably large price errors for longer maturities we reject the original cir model using a likelihood ratio test and conclude that the extended cir model also fails to provide a good description of the treasury market

stock index futures arbitrage in finland theory and evidence in a new market abstract this paper examines the pricing of stock index futures contracts on the new finnish market the striking feature of the finnish market is that there is no institutional framework for short selling of stocks this has been suggested to be the most important reason for the underpricing futures contracts persistent mispricing would however imply that also early and delayed unwindings have value which increases the arbitrage profits several rollover profits are reported in this study this suggest that current stock owners have not yet begun trading on the finnish futures market on a large scale

acceptance of lng as an alternative fuel determinants and policy implications abstract the transport sector causes substantial greenhouse gas emissions and is responsible for the climate change and global warming introducing liquefied natural gas lng as an alternative fuel for heavy duty and long distance transport is an important strategy to increase the sustainability of the transport sector stakeholder s acceptance significantly influences the successful introduction of lng this paper examines the determinants of lng acceptance a causal model based on the technology acceptance framework is suggested and a structural equation model was estimated political implications are discussed to provide an insight which measures are effective to support the introduction of lng as an alternative fuel results suggest that lng as an alternative fuel can be fostered by stimulating demand increasing the availability of lng and improving the ecological effects of the fuel technology

intraday relationships among index arbitrage spot and futures price volatility and spot market volume a transactions data test abstract this paper examines intraday temporal relationships among arbitrage spreads cash and futures price volatility and cash trading volume using transactions data for the major market index futures contracts and the component stocks of the index results indicate that changes in the spread have a significant impact on cash and futures price volatility as well as on cash trading volume the impact of the spread however is attenuated by the short sale restriction in the cash market contrary to popular beliefs a more volatile market leads to subsequent decreases in the spread probably because of increases in the supply of arbitrage services or faster price adjustments

intraday volatility in the stock index and stock index futures markets we examine the intraday relationship between returns and returns volatility in the stock index and stock index futures markets our results indicate a strong intermarket dependence in the volatility of the cash and futures returns price innovations that originate in either the stock or futures markets can predict the future volatility in the other market we show that this relationship persists even during periods in which the dependence in the returns themselves appears to weaken the findings are robust to controlling for potential market frictions such as asynchronous trading in the stock index our results have implications for understanding the pattern of information flows between the two markets article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

innovations new market instruments any measure of the volume of financial innovation would register an explosion in the last ten years for example the swap market has grown from zero to hundreds of billions of dollars in this period the number of traded financial futures contracts has increased from a handful to nearly one hundred the explosion is one of both scale and variety even the british government now issues gilts with non standard coupon rates and conversion features apparently tailored to a whole range of specialised clienteles

a regime switching approach for hedging tanker shipping freight rates tanker shipping is the primary means for the transportation of petroleum and petroleum products around the world and thus plays a crucial role in the energy supply chain however the high volatility of tanker freight rates has been a major concern for market participants and led to the development of the tanker freight derivatives in the form of forward freight agreements ffas the aim of this paper is to investigate the performance of these instruments in managing tanker freight rate risk using a data set for six major tanker routes covering the period between 2005 and 2013 we examine the effectiveness of alternative hedging methods including a bivariate markov regime switching garch model in hedging tanker freight rates the regime switching garch specification links the concept of equilibrium freight rate determination underlying different market conditions and the dynamics of the conditional second moments across high and low volatility regimes overall we find evidence supporting the argument that the tanker freight market is characterized by different regimes however while the use of a regime switching model allows for a significant improvement in the performance of the hedge in sample out of sample results are mixed

technological revolutions and techno economic paradigms this paper locates the notion of technological revolutions in the neo schumpeterian effort to understand innovation and to identify the regularities continuities and discontinuities in the process of innovation it looks at the micro and meso foundations of the patterns observed in the evolution of technical change and at the interrelations with the context that shape the rhythm and direction of innovation on this basis it defines technological revolutions examines their structure and the role that they play in rejuvenating the whole economy through the application of the accompanying techno economic paradigm this over arching meta paradigm or shared best practice common sense is in turn defined and analysed in its components and its impact including its influence on institutional and social change

how can we explain the persistence of the great recession a balanced stability approach the great recession gr brings about a stalemate in macroeconomics on the one hand while describing the immediate effects of the gr standard models fail to account for its persistence on the other heterodox approaches do not regain consensus as they fail to devise an alternative method for capturing the deep causes of the gr that account for its persistence in a systematic way this paper fills this gap by proposing a new framework called balanced stability approach unlike standard macro which takes stability for granted it provides a balanced assessment of stability considering both threats and opportunities for phenomena such as the so called new economy ne on a par on these grounds the paper draws the conclusion that the persistence of the gr is due to a low level of aggregate demand rooted in the structural changes generated by the ne

currency option pricing with mean reversion and uncovered interest parity a revision of the garman kohlhagen model abstract we consider a model for the pricing of currency options where the logarithm of the exchange rate exhibits mean reversion i e follows the omstein uhlenbeck process we mention reasons why exchange rates could exhibit mean reversion the domestic and foreign short interest rates are related to the logarithm of the exchange rate through uncovered interest parity under these assumptions we derive formulas for the value of a european currency option from the point of view of both domestic and foreign investors we also derive formulas for options on forward and futures contracts we compare option values computed by means of the garman kohlhagen model with corresponding results from our model it appears that our model cannot explain all instances of mispricing of currency options by the garman kohlhagen model which have been reported by previous authors the main virtue of our paper however is that we derive a simple model which incorporates clear theoretical relationship between the exchange rate and the domestic and foreign interest rates

index futures arbitrage and the behavior of stock index futures prices this article examines intraday transaction datafor s p 500 stock indexfutures prices and the intraday quotes for the underlying index the data indicate that thefutures price changes are uncorrelated and that the variability of these price changes exceeds the variability ofprice changes in the s p 500 index this excess variability of the futures over the index remains even after controlling for the nonsynchronous prices in the index quotes which induces autocorrelation in the index changes we advance and examine empirically two hypotheses regarding the difference between the futures price and its theoretical value that this mispricing increases on average with maturity and that it is path dependent evidence supporting these hypotheses is presented

no arbitrage conditions for storable commodities and the modeling of futures term structures abstract one distinguishable feature of storable commodities is that they relate to two markets cash market and storage market this paper proves that if no arbitrage exists in the storage cash dual markets the commodity convenience yield has to be non negative however classical reduced form models for futures term structures could allow serious arbitrages due to the high volatility of the convenience yield to avoid negative convenience yield this paper proposes a semi affine arbitrage free model which prices futures analytically and fits futures term structures reasonably well importantly our model prices commodity related contingent claims such as calendar spread options quite differently with classical models

market interactions in returns and volatilities between spot and forward shipping freight markets abstract the lead lag relationship in both returns and volatilities between spot and futures markets has been investigated extensively in the financial economics literature only a limited number of such studies have appeared on forward markets primarily due to the lack of easy access to empirical data this paper uses a unique database in over the counter forward freight agreements ffa to investigate the issue the underlying commodity is non storable being that of a shipping service with the additional feature of transactions costs being higher in the spot market in comparison to the forward market these features have interesting implications for the markets at the practical level the better understanding of the mean and variance dynamics can improve risk management and budget planning decisions

dynamic asset pricing with non redundant forwards abstract in an incomplete market in which non redundant forward contracts contribute to span the uncertainty some standard results of portfolio theory must be amended when the investment opportunity set is driven by k state variables a k 3 mutual fund separation theorem is obtained in lieu of merton s k 2 fund separation result the additional fund is a portfolio that hedges the interest rate risk brought about by the optimal portfolio strategy itself second the mean variance efficiency of the market portfolio of cash assets is neither a necessary nor a sufficient condition for the linear relationship between expected return and beta to hold third the pricing equation for a forward contract is shown to contain an extra term relative to that for a cash asset term we name strategy risk premium

an empirical comparison of continuous time models of implied volatility indices abstract we explore the ability of alternative popular continuous time diffusion and jump diffusion processes to capture the dynamics of implied volatility indices over time the performance of the various models is assessed under both econometric and financial metrics to this end data are employed from major european and american implied volatility indices and the rapidly growing cboe volatility futures market we find that the addition of jumps is necessary to capture the evolution of implied volatility indices under both metrics mean reversion is of second order importance though the results are consistent across the various metrics markets and construction methodologies

spread and volatility in spot and forward exchange rates abstract this paper is concerned with modeling the conditional heteroscedasticity of the prediction error of foreign exchange rates as spot and forward rates are cointegrated we use a system of error correction models for mean prediction to predict the variance we use a vibariate generalized autoregressive conditional heteroscedasticity garch model as a function of the spread using daily series for seven currencies we find that unmodeled conditional heteroscedasticity by garch can generally be explained by the squared spread this indicates that as the spread is bigger the exchange rates are more volatile jel f31 c32

meteor showers or heat waves heteroskedastic intra daily volatility in the foreign exchange market this paper seeks to explain the causes of volatility clustering in exchange rates careful examination of intra daily exchange rates provides a test of two hypotheses heat waves and meteor showers the heat wave hypothesis is that the volatility has only country specific autocorrelation alternatively the meteor shower is a phenomenon of intra daily volatility spillovers from one market to the next using the garch model to specify the heteroskedasticity across intra daily market segments we find that the empirical evidence is generally against the null hypothesis of the heat wave using a volatility type of vector autoregression we examine the impact of news in one market on the time path of per hour volatility in other markets

deep transitions emergence acceleration stabilization and directionality abstract industrial society has not only led to high levels of wealth and welfare in the western world but also to increasing global ecological degradation and social inequality the socio technical systems that underlay contemporary societies have substantially contributed to these outcomes this paper proposes that these socio technical systems are an expression of a limited number of meta rules that for the past 250 years have driven innovation and hence system evolution in a particular direction thereby constituting the first deep transition meeting the cumulative social and ecological consequences of the overall direction of the first deep transition would require a radical change not only in socio technical systems but also in the meta rules driving their evolution the second deep transition this paper develops a new theoretical framework that aims to explain the emergence acceleration stabilization and directionality of deep transitions it does so through the synthesis of two literatures that have attempted to explain large scale and long term socio technical change the multi level perspective mlp on socio technical transitions and techno economic paradigm tep framework

financialization of the global economy the instability of the world financial system starkly revealed in the recent debacle is not the only problem it poses its secularly increasing dominance over the real economy is in itself a phenomenon that needs examining the article traces the source of this increasing dominance not just to the increasingly leveraged and increasingly incomprehensible forms of intermediation between savers and those in the real economy who need credit and insurance but also to the increasingly universal doctrine that maximizing shareholder value is the sole raison d etre of the firm and the promotion by governments of an equity culture some of the social consequences of financialization are exacerbating inequalities greater insecurity misdirection of talent and the erosion of trust copyright 2008 oxford university press

pricing of long dated commodity derivatives do stochastic interest rates matter abstract does modelling stochastic interest rates beyond stochastic volatility improve pricing performance on long dated commodity derivatives to answer this question we consider futures price models for commodity derivatives that allow for stochastic volatility and stochastic interest rates and a correlation structure between the underlying variables we examine the empirical pricing performance of these models on pricing long dated crude oil derivatives estimating the model parameters from historical crude oil futures prices and option prices we find that stochastic interest rate models improve pricing performance on long dated crude oil derivatives when the interest rate volatility is relatively high furthermore increasing the model dimensionality does not tend to improve the pricing performance on long dated crude oil option prices but it matters for long dated futures prices we also find empirical evidence for a negative correlation between crude oil futures prices and interest rates that contributes to improving fit to long dated crude oil option prices

taxes and the pricing of stock index futures stock index futures prices are generally below the level predicted by simple arbitrage models this paper suggests that the discrepancy between the actual and predicted prices is caused by taxes capital gains and losses are not taxed until they are realized as constantinides demonstrates in a recent paper this gives stockholders a valuable timing option if the stock price drops the investor can pass part of the loss on to the government by selling the stock on the other hand if the stock price rises the investor can postpone the tax by not realizing the gain since this option is not available to stock index futures traders the futures prices will be lower than standard no tax models predict on 24 february 1982 the kansas city board of trade began trading futures contracts on the value line average stock index during the next two months both the chicago mercantile exchange and the new york futures exchange also initiated trading in stock index futures although these contracts are actively traded their prices have puzzled both practitioners and academics the observed

innovation in times of crisis national systems of innovation structure and demand this article addresses the impact of the current economic downturn on innovation across europe using micro and macro data we investigate to what extent some structural characteristics of national systems of innovation along with demand affect firms persistency in terms of innovation investment it emerges that the effects of the economic downturn in terms of firms innovation investment are not the same across european countries the competences and quality of the human resources the specialization in the high technology sector together with the development of the financial system seem to be the structural factors which are able to offset the effect of the economic downturn on innovation investments of firms across europe finally some considerations about policies during recessions are discussed

the relation between forward prices and futures prices abstract this paper consolidates the results of some recent work on the relation between forward prices and futures prices it develops a number of propositions characterizing the two prices these propositions contain several testable implications about the difference between forward and futures prices many of the propositions show that equilibrium forward and futures prices are equal to the values of particular assets even though they are not in themselves asset prices the paper then illustrates these results in the context of two valuation models and discusses the effects of taxes and other institutional factors

effects of insider trading disclosures on speculative activity and future prices this paper explores a simple model of the effects of requiring a public disclosure of insider trader activity in future markets

intertemporal commodity futures hedging and the production decision this paper deals with the producer s optimal use of commodity futures in hedging the framework for analysis is an intertemporal consumption and investment model the producer makes his production decisions at the beginning of the period and realizes his return at the end of the time interval during the period he faces both price and output uncertainties in applying stochastic dynamic programming methods this paper shows the effect of these risks on his consumption behavior further the paper investigates his optimal hedging positions in the futures market over time and his optimal production decisions finally implications of these results on the futures markets are discussed this paper studies a normative model of the farmer s optimal hedging strategy and consumption behavior in a continuous time framework recent papers for example berck 3 rolfo 18 stoll 21 have analyzed the farmer s hedging strategies in a one period context these papers have provided interesting insights into the farmer s production decisions and the optimal design of futures contracts and markets however in a one period model some rather restrictive conditions are imposed on the individual s behavior for example in these models an individual is assumed to ignore any information arrival process as a result the individual is assumed to adjust neither consumption behavior nor hedging positions to the changing state of the world during the production period these conditions can be relaxed in a continuous time framework in an intertemporal context the farmer s hedging problem may be viewed as follows since the farm income at harvest depends on both the spot price and the output in bushels the farmer is subject to both price and output uncertainties during the production period 1 when the farmer can hedge only in the commodity futures market he cannot eliminate both the price and output uncertainties by any hedging strategy 2 as the farm income represents a significant portion of his wealth he must necessarily hold an undiversified portfolio during the production period therefore in essence the farmer must solve for his investment consumption behavior and his hedging strategy facing the nonmarketable asset problem mayers 14 in a multiperiod framework in this context one can see intuitively the major difference between a one

hedging against bunker price fluctuations using petroleum futures contracts constant versus time varying hedge ratios the effectiveness of hedging marine bunker price fluctuations in rotterdam singapore and houston is examined using different crude oil and petroleum future contracts traded at the new york mercant

taxes and the futures forward price difference in the 91 day t bill market this paper investigates a tax based explanation for the futures forward price divergence in the ninety one day t bill the explanation is firstly in terms of the distinction between capital gains and losses and ordinary gains and losses and secondly in terms of investors to whom the above distinction applies and investors such as broker dealers to whom it does not the empirical results are encouraging though more ambiguous in the post 1981 period overall it would seem that other factors in addition to taxes are also at work copyright 1989 by ohio state university press

intraday relationships between volatility in s p 500 futures prices and volatility in the s p 500 index abstract this paper examines the intraday relationships between the volatility of s p 500 futures prices and the volatility of the s p 500 index we calculate variance measures for minute to minute price changes on a daily basis and across 30 minute intervals the empirical results indicate that i futures volatility is greater than index volatility ii volatility increased for both futures prices and the index in absolute terms from 1984 through 1986 iii both futures and index volatility increased directly with futures trading volume and iv index volatility was systematically greater during the first 30 minutes of trading each day than at other times granger tests however reveal no systematic pattern of futures volatility leading index volatility or index volatility leading futures volatility

determinants of hedging and risk premia in commodity futures markets this paper examines the determinants of commodity futures hedging and of risk premia arising from covariation of the futures price with stock market returns and with the reve nues of producers owing to supply shocks that stochastically redistribute real wealth surplus between producers and consumers and to limited participation in the futures market the total risk premium in the model is not proportional to the contract s covariance with aggregate consumption stock market variability interacts with the incentive to hedge causing the producer hedging component of the risk premium to increase de crease with income elasticity for a normal inferior good production costs that depend on output raise the premium we argue that output and demand shocks will typically be positively correlated raising the premium high supply elasticity reduces the absolute heding premium by reducing the variability of spot price and revenue

econometric modelling of non ferrous metal prices abstract this article evaluates the significance of the empirical models and the distributional properties of prices in non ferrous metal spots and futures markets published in leading refereed economics and finance journals between 1980 and 2002 the survey focuses on econometric analyses of pricing and return models applied to exchange based spot and futures markets for the main industrially used non ferrous metals namely aluminium copper lead nickel tin and zinc published empirical research is evaluated in the light of the type of contract examined frequency of data used choice of both dependent and explanatory variables use of proxy variables type of model chosen economic hypotheses tested methods of estimation and calculation of ses for inference reported descriptive statistics use of diagnostic tests of auxiliary assumptions use of nested and non nested tests use of information criteria and empirical implications for non ferrous metals