Pricing Term Structure Risk in Futures Markets

Research output: Working paperDiscussion paperOther research output

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Abstract

One-period expected returns on futures contracts with di erent maturities di er because of risk premia in the spreads between futures and spot prices.We analyze the expected returns for futures contracts with di erent maturities using the information that is present in the current term structure of futures prices.A simple a ne one-factor model that implies a constant covariance between the pricing kernel and the cost-of-carry can not be rejected for heating oil and German Mark futures contracts.For gold and soybean futures the risk premia depend on the slope of the current term structure of futures prices, while for live cattle futures the evidence is mixed.
Original languageEnglish
Place of PublicationTilburg
PublisherFinance
Number of pages24
Volume1996-78
Publication statusPublished - 1996

Publication series

NameCentER Discussion Paper
Volume1996-78

Fingerprint

Futures markets
Futures prices
Futures contracts
Term structure
Pricing
Maturity
Risk premia
Expected returns
Pricing kernel
Spot price
Soybean
Heating
Cattle
Oil
Costs

Keywords

  • futures markets
  • financial risk

Cite this

Nijman, T. E., de Roon, F. A., & Veld, C. H. (1996). Pricing Term Structure Risk in Futures Markets. (CentER Discussion Paper; Vol. 1996-78). Tilburg: Finance.
Nijman, T.E. ; de Roon, F.A. ; Veld, C.H. / Pricing Term Structure Risk in Futures Markets. Tilburg : Finance, 1996. (CentER Discussion Paper).
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Nijman, TE, de Roon, FA & Veld, CH 1996 'Pricing Term Structure Risk in Futures Markets' CentER Discussion Paper, vol. 1996-78, Finance, Tilburg.

Pricing Term Structure Risk in Futures Markets. / Nijman, T.E.; de Roon, F.A.; Veld, C.H.

Tilburg : Finance, 1996. (CentER Discussion Paper; Vol. 1996-78).

Research output: Working paperDiscussion paperOther research output

TY - UNPB

T1 - Pricing Term Structure Risk in Futures Markets

AU - Nijman, T.E.

AU - de Roon, F.A.

AU - Veld, C.H.

N1 - Pagination: 24

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Y1 - 1996

N2 - One-period expected returns on futures contracts with di erent maturities di er because of risk premia in the spreads between futures and spot prices.We analyze the expected returns for futures contracts with di erent maturities using the information that is present in the current term structure of futures prices.A simple a ne one-factor model that implies a constant covariance between the pricing kernel and the cost-of-carry can not be rejected for heating oil and German Mark futures contracts.For gold and soybean futures the risk premia depend on the slope of the current term structure of futures prices, while for live cattle futures the evidence is mixed.

AB - One-period expected returns on futures contracts with di erent maturities di er because of risk premia in the spreads between futures and spot prices.We analyze the expected returns for futures contracts with di erent maturities using the information that is present in the current term structure of futures prices.A simple a ne one-factor model that implies a constant covariance between the pricing kernel and the cost-of-carry can not be rejected for heating oil and German Mark futures contracts.For gold and soybean futures the risk premia depend on the slope of the current term structure of futures prices, while for live cattle futures the evidence is mixed.

KW - futures markets

KW - financial risk

M3 - Discussion paper

VL - 1996-78

T3 - CentER Discussion Paper

BT - Pricing Term Structure Risk in Futures Markets

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CY - Tilburg

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Nijman TE, de Roon FA, Veld CH. Pricing Term Structure Risk in Futures Markets. Tilburg: Finance. 1996. (CentER Discussion Paper).