Modeling nonlinear dynamics of daily futures price changes

Article Abstract:

Daily log futures price changes were found to exhibit nonlinear serial dependence, using BDS and Q2 statistics tests. Using the GARCH process, researchers have discovered that daily futures log price changes of the four controlled futures contracts are linearly uncorrelated when errors are modeled. Although the GARCH error process is an adequate model for representing daily log price changes of major currencies such as the Yen, Deutschemark and the Euro, it is considered an imperfect model for representing the behavior of daily log price changes for the Standard and Poors 500 futures.

Usage, Financial futures, Log-linear models

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Time-varying risk premia in the foreign currency futures basis

Article Abstract:

The existence of a time-varying risk premium (TVRP) in a variety of futures markets for commodities and in currency futures pricing has been confirmed. The presence of TVRP in the currency futures basis was thus examined by regressing the currency futures basis and the realized spot-price change upon proxies for systematic risk in the economy. Through the use of three common variables, namely dividend yield, default spread and term spread, the presence of TVRP in the currency futures basis related to US macroeconomic risks was established.

Futures market, Futures markets, Foreign exchange futures

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The soybean crush spread: empirical evidence and trading strategies

Article Abstract:

A study has been conducted to investigate the market trends affecting the soybean crush spread. Trading simulations were done based on the most recent five-day average. The results showed high profitability of simulated trading rules during the sample period. Since simulations were done in a controlled environment, the results do not necessarily have implications for market efficiency. The simulations merely determine the degree of mean reversion necessary to give rise to profitable trading strategies.

Statistics, Securities, Stock price forecasting

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