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Advance Contracts for the Sale of Wool in Medieval England; An Undeveloped and Inefficient Market?


  • Adrian Bell

    () (ICMA Centre, University of Reading)

  • Chris Brooks

    () (ICMA Centre, University of Reading)

  • Paul Dryburgh

    () (ICMA Centre, University of Reading)


While it is commonly believed that derivative instruments are a recent invention, we document the existence of forward contracts for the sale of wool in medieval England around 700 years ago. The contracts were generally entered into by English monasteries, who frequently sold their wool for up to twenty years in advance to mostly foreign and particularly Italian merchants. Employing a unique source of data collected by hand from the historical records, we determine the interest rates implied in these transactions and we also examine the efficiency of the forward and spot markets. The calculated interest rates average around 20%, in accordance with available information concerning the interest rates used in other types of transactions at that time. Perhaps surprisingly, we also find little evidence of informational inefficiencies in these markets.

Suggested Citation

  • Adrian Bell & Chris Brooks & Paul Dryburgh, 2005. "Advance Contracts for the Sale of Wool in Medieval England; An Undeveloped and Inefficient Market?," ICMA Centre Discussion Papers in Finance icma-dp2005-01, Henley Business School, Reading University, revised Nov 2005.
  • Handle: RePEc:rdg:icmadp:icma-dp2005-01

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    References listed on IDEAS

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    More about this item


    Wood market; forward contracts; market efficinecy; Medieval England; Interest rates;

    JEL classification:

    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • N13 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: Pre-1913
    • N53 - Economic History - - Agriculture, Natural Resources, Environment and Extractive Industries - - - Europe: Pre-1913


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