Andreas Röthig () (Institut für Volkswirtschaftslehre (Department of Economics), Technische Universität Darmstadt (Darmstadt University of Technology))
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This study compares the relation between backwardation and optimal hedging demand as suggested by economic theory to empirical findings concerning the impact of weak and strong backwardation on hedgers' trading volume in six long and short currency futures contracts. First, the optimal hedging demand of a representative importer, with and without hedging costs, is derived. Then hedgers' position data from the Commitments of Traders (COT) report are regressed on weak and strong backwardation. The empirical results offer little support for the hypotheses suggested by economic theory.
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Paper provided by Institut für Volkswirtschaftslehre (Department of Economics), Technische Universität Darmstadt (Darmstadt University of Technology) in its series Darmstadt Discussion Papers in Economics with number
190.
Find related papers by JEL classification: C20 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - General D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
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