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Information-time based futures pricing
- Source :
- Physica A: Statistical Mechanics and its Applications. 388:3826-3836
- Publication Year :
- 2009
- Publisher :
- Elsevier BV, 2009.
-
Abstract
- This study follows Clark [P.K. Clark, A subordinated stochastic process model with finite variance for speculative prices, Econometrica 41 (1973) 135–155] and Chang, Chang and Lim [C.W. Chang, S.K. Chang, K.G. Lim, Information-time option pricing: Theory and empirical evidence, Journal of Financial Economics 48 (1998) 211–242] to subordinate an information-time based directing process into calendar-time based parent processes. A closed-form futures pricing formula is derived after taking into account the information-time setting and the stochasticity of the spot price, interest rate, and convenience yield. According to the empirical results on the TAIEX and TFETX data from 1998/7/21 to 2003/12/31, the information-time based model performs better than its calendar-time based counterpart and the cost of carry model, especially when the information arrival intensity estimates become larger.
Details
- ISSN :
- 03784371
- Volume :
- 388
- Database :
- OpenAIRE
- Journal :
- Physica A: Statistical Mechanics and its Applications
- Accession number :
- edsair.doi...........fb30160090449cf2bea88a4713c3ab6f