Financially constrained index futures arbitrage

Kristoffer Glover and Hardy Hulley

Journal of Futures Markets, 2022, vol. 42, issue 9, 1688-1703

Abstract: We develop two models for index futures arbitrage that take the financing constraints faced by real‐world arbitrageurs into account. Our models predict that the price of an index futures contract and the value of its underlying index should deviate further from their theoretical cost‐of‐carry relationship when (a) the contract has a long time to go before expiry, and (b) volatility is high. The fact that these predictions enjoy considerable empirical support highlights the importance of financing constraints for explaining index futures mispricing.

Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1002/fut.22293

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:jfutmk:v:42:y:2022:i:9:p:1688-1703

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0270-7314

Access Statistics for this article

Journal of Futures Markets is currently edited by Robert I. Webb

More articles in Journal of Futures Markets from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley Content Delivery ().