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Delivery horizon and grain market volatility

Berna Karali, Jeffrey Dorfman and Walter Thurman

Journal of Futures Markets, 2010, vol. 30, issue 9, 846-873

Abstract: We study the difference in the volatility dynamics of CBOT corn, soybeans, and oats futures prices across different delivery horizons via a smoothed Bayesian estimator. We find that futures price volatilities in these markets are affected by inventories, time to delivery, and the crop progress period and that there are important differences in the effects across delivery horizons. We also find that price volatility is higher before the harvest starts in most cases compared to the volatility during the planting period. These results have implications for hedging, options pricing, and the setting of margin requirements. © 2010 Wiley Periodicals, Inc. Jrl Fut Mark 30:846–873, 2010

Date: 2010
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Working Paper: Does Futures Price Volatility Differ Across Delivery Horizon? (2009) Downloads
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