The Information Content of Prices in Derivative Security Markets

Louis O. Scott
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Louis O. Scott: International Monetary Fund

IMF Staff Papers, 1992, vol. 39, issue 3, 596-625

Abstract: Prices in futures and options markets reflect expectations about future price movements in spot markets, but these prices can also be influenced by risk premia. Futures and forward prices are sometimes interpreted as market expectations for future spot prices, and option prices are used to calculate the market's expectations for future volatility of spot prices. Do these prices accurately reflect market expectations? The information that is reflected in futures prices and option prices is examined in this paper through a review of both the relevant analytical models and the empirical evidence.

JEL-codes: G12 G13 G14 (search for similar items in EconPapers)
Date: 1992
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