Measuring Asset Values for Cash Settlement in Derivative Markets: Hedonic Repeated Measures indices and Perpetual Futures
AbstractTwo proposals are made that may facilitate the creation of derivative market instruments, such as futures contracts, cash-settled based on economic indices. The first proposal concerns index number construction: indices based on infrequent measurements of nonstandardized items may control for quality change by using a hedonic repeated measures method, an index number construction method that follows individual assets or subjects through time and also takes account of measured quality variables. The second proposal is to establish markets for perpetual claims on cash flows matching indices of dividends or rents. Such markets may help us to measure the prices of the assets generating these dividends or rents even when the underlying asset prices are difficult or impossible to observe directly. A perpetual futures contract is proposed that would cash settle every day in terms of both the change in the futures price and the dividend or rent index for that day.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Technical Working Papers with number 0131.
Date of creation: Dec 1993
Date of revision:
Publication status: published as Journal of Finance, Volume 48, No. 3, pp. 911-931, (July 1993).
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Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
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Other versions of this item:
- Shiller, Robert J, 1993. " Measuring Asset Values for Cash Settlement in Derivative Markets: Hedonic Repeated Measures Indices and Perpetual Futures," Journal of Finance, American Finance Association, vol. 48(3), pages 911-31, July.
- Robert J. Shiller, 1992. "Measuring Asset Values for Cash Settlement in Derivative Markets: Hedonic Repeated Measures Indices and Perpetual Futures," Cowles Foundation Discussion Papers 1036, Cowles Foundation for Research in Economics, Yale University.
- G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
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