Parametric Bootstrap Tests for Futures Price and Implied Volatility Biases With Application to Rating Dairy Margin Insurance

Marin Bozic, John Newton, Cameron S. Thraen and Brian W. Gould

No 170416, 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota from Agricultural and Applied Economics Association

Abstract: We develop a new parametric bootstrap-based statistical test for presence of futures price and options-based implied volatility biases. The new test is applicable to data with overlapping prediction horizons. Information on anticipated volatility embedded in options prices is explicitly used when testing for futures price biases. Our method is well adapted to analysis of fast changing commodity markets as it does not rely on asymptotic theory and does not require a time series spanning several decades. We apply the new test to investigate if futures and options biases can explain very low loss ratios exhibited by USDA’s Livestock Gross Margin for Dairy Cattle insurance program.

Keywords: Agricultural and Food Policy; Research Methods/ Statistical Methods; Risk and Uncertainty (search for similar items in EconPapers)
Pages: 60
Date: 2014
New Economics Papers: this item is included in nep-agr and nep-rmg
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea14:170416

DOI: 10.22004/ag.econ.170416

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