The CD futures market: hedging and price discovery performance

James Anthony Overdahl

ISU General Staff Papers from Iowa State University, Department of Economics

Abstract: This study was initiated to examine the hedging and price discovery performance of the CD futures market. In the first part of the study, a method of evaluating the performance of anticipatory hedges was developed. This method improved upon the methods of others by attempting to account for hedgers' expectations of future spot rates;In the second part of the study, a direct test of the weak-form efficient markets hypothesis was applied to the CD futures market. Efficient markets ensure that the market is performing its price discovery function;The results of the study demonstrate that the CD futures market is adequately performing both its hedging and price discovery functions.

Date: 1984-01-01
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