Deriving Theoretically Sound Price Series for Hypothetical Futures Contracts
Josh Maples and
Eunchun Park ()
No 266642, 2018 Annual Meeting, February 2-6, 2018, Jacksonville, Florida from Southern Agricultural Economics Association
Changing the underlying spot prices that a futures contract is based upon is sometimes considered. However, it is uncertain whether the new contract will outperform the existing contract until it is implemented. A tool that could derive a different futures contract’s price series, that is, one based on a different underlying spot price, from the existing futures price series could be useful in evaluating the potential of a new futures contract. In this paper, using Schwartz and Smith (2000) and Schwartz (1997) two factor model, we develop methods to derive a price series for a futures contract that is based on a different spot price than an existing futures contract. Live hog futures underwent this change in 1996, going from being based on the live hog price to the lean hog index price and being renamed lean hog futures. In 1996 there was a period of time when both live hog futures contracts and lean hog futures contracts were trading. We use our methods to generate the lean hog futures price series and compare our generated lean hog futures price series to the observed prices of the lean hog futures contract during 1996.
Keywords: Risk; and; Uncertainty (search for similar items in EconPapers)
References: Add references at CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
https://ageconsearch.umn.edu/record/266642/files/S ... n.pdf?subformat=pdfa (application/pdf)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:ags:saea18:266642
Access Statistics for this paper
More papers in 2018 Annual Meeting, February 2-6, 2018, Jacksonville, Florida from Southern Agricultural Economics Association Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().