IDEAS home Printed from https://ideas.repec.org/a/eee/intfin/v10y2000i2p151-161.html
   My bibliography  Save this article

Limiting differences between forward and futures prices in a Lucas consumption model

Author

Listed:
  • Wiener, Zvi
  • Benninga, Simon
  • Protopapadakis, Aris

Abstract

A recent paper (Benninga-Protopapadakis 1994) considered a Lucas asset pricing model and showed that the pricing of forward and futures contracts was expressible as a simple matrix function. In this paper we derive limiting conditions for these differences and relate them to the eigenvectors of the state price matrix. We show that except for a zero-measure set of state price matrices, the differences are always small.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Wiener, Zvi & Benninga, Simon & Protopapadakis, Aris, 2000. "Limiting differences between forward and futures prices in a Lucas consumption model," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 10(2), pages 151-161, June.
  • Handle: RePEc:eee:intfin:v:10:y:2000:i:2:p:151-161
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1042-4431(99)00028-1
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Richard, Scott F. & Sundaresan, M., 1981. "A continuous time equilibrium model of forward prices and futures prices in a multigood economy," Journal of Financial Economics, Elsevier, vol. 9(4), pages 347-371, December.
    2. Robert A. JARROW & George S. OLDFIELD, 2008. "Forward Contracts And Futures Contracts," World Scientific Book Chapters, in: Financial Derivatives Pricing Selected Works of Robert Jarrow, chapter 11, pages 237-246, World Scientific Publishing Co. Pte. Ltd..
    3. Harrison, J. Michael & Kreps, David M., 1979. "Martingales and arbitrage in multiperiod securities markets," Journal of Economic Theory, Elsevier, vol. 20(3), pages 381-408, June.
    4. Benninga, Simon & Protopapadakis, Aris, 1994. "Forward and Futures Prices with Markovian Interest-Rate Processes," The Journal of Business, University of Chicago Press, vol. 67(3), pages 401-421, July.
    5. Lucas, Robert E, Jr, 1978. "Asset Prices in an Exchange Economy," Econometrica, Econometric Society, vol. 46(6), pages 1429-1445, November.
    6. Benninga, Simon & Protopapadakis, Aris, 1983. "Real and Nominal Interest Rates under Uncertainty: The Fisher Theorem and the Term Structure," Journal of Political Economy, University of Chicago Press, vol. 91(5), pages 856-867, October.
    7. Cox, John C. & Ingersoll, Jonathan Jr. & Ross, Stephen A., 1981. "The relation between forward prices and futures prices," Journal of Financial Economics, Elsevier, vol. 9(4), pages 321-346, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Suresh M. Sundaresan, 2000. "Continuous‐Time Methods in Finance: A Review and an Assessment," Journal of Finance, American Finance Association, vol. 55(4), pages 1569-1622, August.
    2. Abraham Lioui & Patrice Poncet, 2000. "The Minimum Variance Hedge Ratio Under Stochastic Interest Rates," Management Science, INFORMS, vol. 46(5), pages 658-668, May.
    3. Björn Lutz, 2010. "Pricing of Derivatives on Mean-Reverting Assets," Lecture Notes in Economics and Mathematical Systems, Springer, number 978-3-642-02909-7, July.
    4. Duffie, Darrell, 2003. "Intertemporal asset pricing theory," Handbook of the Economics of Finance, in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, edition 1, volume 1, chapter 11, pages 639-742, Elsevier.
    5. Jack S. K. Chang & Jean C. H. Loo & Carolyn C. Wu Chang, 1990. "The Pricing Of Futures Contracts And The Arbitrage Pricing Theory," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 13(4), pages 297-306, December.
    6. Lioui, Abraham & Poncet, Patrice, 2003. "Dynamic asset pricing with non-redundant forwards," Journal of Economic Dynamics and Control, Elsevier, vol. 27(7), pages 1163-1180, May.
    7. Kempf, Alexander & Spengel, Christoph, 1993. "Die Bewertung des DAX-Futures: Der Einfluß von Dividenden," ZEW Discussion Papers 93-12, ZEW - Leibniz Centre for European Economic Research.
    8. Ke Du, 2013. "Commodity Derivative Pricing Under the Benchmark Approach," PhD Thesis, Finance Discipline Group, UTS Business School, University of Technology, Sydney, number 1-2013, January-A.
    9. Gupta, Anurag & Subrahmanyam, Marti G., 2000. "An empirical examination of the convexity bias in the pricing of interest rate swaps," Journal of Financial Economics, Elsevier, vol. 55(2), pages 239-279, February.
    10. Stanescu, Silvia & Tunaru, Radu & Candradewi, Made Reina, 2014. "Forward–futures price differences in the UK commercial property market: Arbitrage and marking-to-model explanations," International Review of Financial Analysis, Elsevier, vol. 34(C), pages 177-188.
    11. repec:dau:papers:123456789/5374 is not listed on IDEAS
    12. Jean-Paul Décamps, 1993. "Valorisation de produits obligataires dans un modéle d'équilibre général en temps discret," Annals of Economics and Statistics, GENES, issue 31, pages 73-100.
    13. Wimschulte, Jens, 2010. "The futures and forward price differential in the Nordic electricity market," Energy Policy, Elsevier, vol. 38(8), pages 4731-4733, August.
    14. Yen, Simon & Wang, Jai Jen, 2009. "Information-time based futures pricing," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 388(18), pages 3826-3836.
    15. Robert W. Kolb & Gerald D. Gay, 1985. "A Pricing Anomaly In Treasury Bill Futures," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 8(2), pages 157-167, June.
    16. Joshua V. Rosenberg & Leah G. Traub, 2006. "Price discovery in the foreign currency futures and spot market," Staff Reports 262, Federal Reserve Bank of New York.
    17. Ke Du, 2013. "Commodity Derivative Pricing Under the Benchmark Approach," PhD Thesis, Finance Discipline Group, UTS Business School, University of Technology, Sydney, number 2, July-Dece.
    18. Carolyn W. Chang & Jack S. K. Chang & Hsing Fang, 1996. "Optimal Futures Hedge With Marking-To-Market And Stochastic Interest Rates," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 19(3), pages 309-326, September.
    19. Lin, James Wuh, 1996. "Arbitrage, carrying costs, and inflation: A reexamination of market efficiency in treasury bill futures," International Review of Economics & Finance, Elsevier, vol. 5(2), pages 207-222.
    20. Robert A. Jarrow, 2009. "The Term Structure of Interest Rates," Annual Review of Financial Economics, Annual Reviews, vol. 1(1), pages 69-96, November.
    21. Lioui, Abraham, 1998. "Currency risk hedging: Futures vs. forward," Journal of Banking & Finance, Elsevier, vol. 22(1), pages 61-81, January.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:intfin:v:10:y:2000:i:2:p:151-161. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/intfin .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.