Migration of Price Discovery With Constrained Futures Markets
This 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.
|Date of creation:||01 Dec 2001|
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- Christopher K. Ma & Ramesh P. Rao & R. Stephen Sears, 1989. "Limit moves and price resolution: The case of the treasury bond futures market," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 9(4), pages 321-335, 08.
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"Implicit Bayesian Inference Using Option Prices,"
Monash Econometrics and Business Statistics Working Papers
5/00, Monash University, Department of Econometrics and Business Statistics.
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- Joan Evans & James M. Mahoney, 1996. "The effects of daily price limits on cotton futures and options trading," Research Paper 9627, Federal Reserve Bank of New York.
- Barone-Adesi, Giovanni & Whaley, Robert E, 1987. " Efficient Analytic Approximation of American Option Values," Journal of Finance, American Finance Association, vol. 42(2), pages 301-20, June.
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- Subrahmanyam, Avanidhar, 1994. " Circuit Breakers and Market Volatility: A Theoretical Perspective," Journal of Finance, American Finance Association, vol. 49(1), pages 237-54, March.
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