Price Discovery in Futures and Options Markets

We evaluate price discovery in the natural gas futures and futures options markets using a transaction‐based approach. By sampling market maker prices, we allow for a distinction between market maker buy and sell futures prices, both directly from trades in the futures market, and futures prices imp...

Ausführliche Beschreibung

Gespeichert in:
Bibliographische Detailangaben
Veröffentlicht in:The journal of futures markets 2014-09, Vol.34 (9), p.853-867
Hauptverfasser: Boyd, Naomi, Locke, Peter
Format: Artikel
Sprache:eng
Schlagworte:
Online-Zugang:Volltext
Tags: Tag hinzufügen
Keine Tags, Fügen Sie den ersten Tag hinzu!
Beschreibung
Zusammenfassung:We evaluate price discovery in the natural gas futures and futures options markets using a transaction‐based approach. By sampling market maker prices, we allow for a distinction between market maker buy and sell futures prices, both directly from trades in the futures market, and futures prices implied by trades in the options market. Information shares are compared between futures and options markets as well as within the options market. Given the common architecture of the two markets, as expected we find little price information generated in the options market. Within the options market, the highly levered out‐of‐the‐money options offer less price discovery than other options. We attribute this to the higher transaction costs of out‐of‐the‐money options. © 2013 Wiley Periodicals, Inc. Jrl Fut Mark 34:853–867, 2014
ISSN:0270-7314
1096-9934
DOI:10.1002/fut.21623