scholarly journals How Option Markets Affect Price Discovery on the Spot Markets: A Survey of the Empirical Literature and Synthesis

2009 ◽  
Vol 4 (8) ◽  
Author(s):  
Afef ANSI ◽  
Olfa BEN OUDA
Keyword(s):  
Price Discovery ◽  
Empirical Literature ◽  
Spot Markets ◽  
Option Markets

scholarly journals Relationship of Causality Between Spot And Futures Markets of Borsa Istanbul Index 30 and Dow Jones Industrial Average

2019 ◽  
Author(s):  
Letife Özdemir ◽  
Ercan Özen ◽  
Simon Grima
Keyword(s):  
Futures Markets ◽  
Price Discovery ◽  
Emerging Market ◽  
Spot Market ◽  
Spot Markets ◽  
Regression Equations ◽  
International Level ◽  
Causality Test ◽  
Futures Contract ◽  
Causality Relationship

Futures markets are mainly used as a tool for price discovery and for risk management on the spot markets and enable diversification for international portfolio investments. With this study we aim (1) to investigate the causality relationship between futures markets and spot market and (2) to examine the causality relationship between futures markets and spot markets in different countries. We are interested in both the futures markets - spot market relations and the interactions between the markets at international level. For variables we used the the BIST30 spot index and BIST30 futures contract representing the Borsa Istanbul market and the Dow-Jones 30 index and Dow-Jones 30 futures contract, which are the most important indices representing the US markets. Daily closing price data for the period between 2nd January, 2009 and 18th June, 2018 were analyzed using correlation, unit root test, causality test and regression equations. The results of the study show that the futures markets continue their price discovery role for both the spot markets and futures markets and are influential on other futures and spot markets at international level. These findings are important for investors wanting to invest in Turkey and in similarly considered emerging market economies. It will help investors take informed decisions by providing them with a more efficient price estimations utilizing the futures markets.

scholarly journals An Experimental Economics Approach to Analyzing Price Discovery in Forward and Spot Markets

1997 ◽  
Vol 29 (2) ◽  
pp. 327-336 ◽  
Author(s):  
Joseph L. Krogmeier ◽  
Dale J. Menkhaus ◽  
Owen R. Phillips ◽  
John D. Schmitz
Keyword(s):  
Experimental Economics ◽  
Laboratory Experiments ◽  
Price Discovery ◽  
Spot Market ◽  
Spot Markets ◽  
Forward Markets ◽  
Forward Market ◽  
Pricing Behavior ◽  
The Difference ◽  
Supply Schedule

AbstractLaboratory experiments are used to generate data that facilitate investigation of pricing behavior in forward and spot markets. Results suggest a tendency for prices in a spot market to converge to levels higher than those in a forward market. The difference in these market environments is the supply schedule. Buyers in a spot market are aware that supply is inelastic and become relatively aggressive bidders. Forward markets have a relatively elastic supply schedule and buyers fare better. This may motivate firms to promote forward markets and/or vertically integrate in the procurement of inputs.

Price Discovery Analysis of Oil Futures Market: A View of Interaction Effect

2012 ◽  
Vol 433-440 ◽  
pp. 4366-4376
Author(s):  
Yong Zeng ◽  
Lei Chen
Keyword(s):  
Interaction Effect ◽  
Information Transfer ◽  
Futures Markets ◽  
Price Discovery ◽  
Futures Market ◽  
Simultaneous Equation ◽  
Spot Markets ◽  
Futures Prices ◽  
Oil Futures ◽  
Arbitrage Trading

Whether oil futures market can perform price discovery function well is very important in global economics and energy markets. The interaction between oil spot and futures prices exists due to intraday information transfer and arbitrage trading. However, the traditional methods used in price discovery analysis ignore the interaction, and thus introduce the biased conclusions. This paper uses simultaneous equation analyze the interaction effect between oil spot and futures returns, estimates the model by the method of modified identification through heteroskedasticity (modified ITH) and examines price discovery function of oil futures markets. Using weekly spot and futures prices of Brent crude oil, gas oil and heating oil between Feb 12, 1999 and Jan 30, 2009, the results suggest oil futures return will affect the corresponding oil spot return. The unidirectional interaction exists. This indicates the information will transfer from futures markets to spot markets and oil futures markets have the major price discovery function. This paper also offers a new view of examining price discovery, i.e. interaction effect.

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