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Basis Behavior (basis + behavior)

Distribution by Scientific Domains

Business, Economics, Finance and Accounting	100%

Selected Abstracts

ESTIMATING THE VALUE OF DELIVERY OPTIONS IN FUTURES CONTRACTS

THE JOURNAL OF FINANCIAL RESEARCH, Issue 3 2005
Jana Hranaiova
Abstract We analyze the effect various delivery options embedded in commodity futures contracts have on the futures price. The two embedded options considered are the timing and location options. We show that early delivery is always optimal when only a timing option is present, but not so when joint options are present. The estimates of the combined options are much smaller than the comparable estimates for the timing option alone. The average value of the joint option is about 5% of the average basis on the first day of the maturity month. This suggests that joint options can increase deliverable supplies while potentially having only a small effect on basis behavior. [source]

Contract modifications and the basis behavior of live cattle futures

THE JOURNAL OF FUTURES MARKETS, Issue 6 2004
James E. Newsome
The purpose of this study was to assess the basis behavior of the Live Cattle Futures contract at the Chicago Mercantile Exchange (CME) before and after the 1995 contract changes. Additionally, an alternative method of basis calculation utilizing weighted mean futures prices versus settlement futures prices was compared to determine which method provides a better representation of the basis level. Within a regression model with heteroskedascity error framework, we found that the level of nearby basis in the period after June 1995 has shifted lower and the average monthly open interest of net commercial long positions has substantially increased after the contract modifications. These empirical results are consistent with the notion that more long activity entered the market in response to the contract modifications. Additionally, an alternative (new) measure of basis calculation (cash price minus weighted mean futures price) produced similar results to two other commonly used measures. In conclusion, the 1995 contract changes have neither increased nor decreased the volatility of live cattle basis. © 2004 Wiley Periodicals, Inc. Jrl Fut Mark 24:557,590, 2004 [source]

Index futures leadership, basis behavior, and trader selectivity

THE JOURNAL OF FUTURES MARKETS, Issue 7 2002
Arjun Chatrath
Employing intraday data for futures and cash values for the S&P 500 over the 1993,1996 period, we attempt to characterize the lead,lag relationship between these two markets and their basis behavior. Our findings show evidence of pronounced futures leadership when markets are rising, with no feedback from the cash market. However, when markets are falling, futures leadership is less evident and significant feedback from the cash market is noted. We also provide evidence of a positive relationship between the basis and return volatility. We offer an explanation, based on trader selectivity, for the leadership-asymmetry and the basis,volatility relationship. © 2002 Wiley Periodicals, Inc. Jrl Fut Mark 22:649,677, 2002 [source]