Migration of Price Discovery With Constrained Futures Markets
AbstractThis paper investigates the information content of futures option prices when the futures price is regulated while the futures option price itself is not. The New York Board of Trade provides the empirical setting for this type of dichotomy in regulation. Most commodity derivatives markets regulate prices of all derivatives on a particular commodity simultaneously. NYBOT has taken an almost unique position by imposing daily price limits on their futures contracts while leaving the options prices on these futures contracts unconstrained. The study takes a particular interest in the volatility and futures prices of the options-implied risk neutral density when the underlying futures contract is locked limit.
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Bibliographic InfoPaper provided by Quantitative Finance Research Centre, University of Technology, Sydney in its series Research Paper Series with number 70.
Date of creation: 01 Dec 2001
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option implied density; price limits;
Find related papers by JEL classification:
- G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
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"Implicit Bayesian Inference Using Option Prices,"
Monash Econometrics and Business Statistics Working Papers
5/03, Monash University, Department of Econometrics and Business Statistics.
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