Do Commodity Index Traders Destabilize Agricultural Futures Prices?

2012 ◽  
Author(s):  
Martin T. Bohl ◽  
Farrukh Javed ◽  
Patrick M. Stephan
Keyword(s):  
Futures Prices ◽  
Agricultural Futures

The impact of embedded location options on price discovery of agricultural futures contracts – the evidence from the Chana contract

2022 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Sanjay Mansabdar ◽  
Hussain C. Yaganti ◽  
Sankarshan Basu
Keyword(s):  
Price Discovery ◽  
Time Series Data ◽  
Futures Contracts ◽  
Series Data ◽  
Futures Prices ◽  
Content Type ◽  
Futures Contract ◽  
Agricultural Futures ◽  
Embedded Options ◽  
The Impact

Purpose Embedded options can create asymmetries in information impounded by cash and futures markets, causing errors in price discovery estimation. This paper aims to investigate the impact of embedded location options on measures of price discovery. Design/methodology/approach Various price discovery metrics are computed using observed futures prices that contain embedded location options and cash prices for Chana. Prices of a futures contract that contains no options using observed futures prices and estimates of location option value are synthesized. The price discovery measures are recomputed using synthetic option-adjusted futures contract prices and cash prices, and changes in these measures are attributed to the impact of the embedded location option. Findings If the presence of the location option is ignored, futures appear to dominate price discovery. Once the location option is adjusted for, cash markets are found to dominate price discovery. Research limitations/implications The lack of complete time-series data from the exchange for multiple commodities allows only limited empirical evidence for generalizing conclusions. Practical implications This paper highlights that regulators, exchanges and policymakers in India need to revisit delivery specifications of agricultural commodity futures contracts to enhance their utility from a price discovery perspective. Originality/value This work shows that ignoring the presence of embedded options can cause significant errors in price discovery assessment of agricultural futures contracts, particularly in heterogenous cash markets.

Do Commodity Index Traders Destabilize Agricultural Futures Prices?

2013 ◽  
Vol 59 (2) ◽  
pp. 125-148 ◽  
Author(s):  
Martin T. Bohl, ◽  
Farrukh Javed, ◽  
Patrick M. Stephan,
Keyword(s):  
Futures Prices ◽  
Agricultural Futures

DYNAMICS BETWEEN NORTH AMERICAN AND EUROPEAN AGRICULTURAL FUTURES PRICES DURING TURMOIL AND FINANCIALIZATION

2016 ◽  
Vol 69 (1) ◽  
pp. 57-76 ◽  
Author(s):  
Philipp Adämmer ◽  
Martin T. Bohl ◽  
Ernst-Oliver von Ledebur
Keyword(s):  
North American ◽  
Futures Prices ◽  
Agricultural Futures
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