Dollar jump fears, 1984-1992: distributional abnormalities implicit in currency futures options

Article Abstract:

Deutsche mark futures options for 1984-92 and yen futures options for 1986-92 are investigated for deviations from the lognormal assumption of standard option pricing models. Two methods are employed: an atheoretic skewness premium and daily estimates of moments utilizing a model for pricing US foreign currency futures options under systematic exchange rate jump risk. Significant deviations over time is found in all moments, including implicit skewness and kurtosis. The implicit abnormalities imply future abnormalities in log-differenced $/DM futures prices but not $/yen.

Analysis, Prices and rates, Currency options, Foreign exchange futures

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Effects of futures trading on the spot market bid-ask spread

Article Abstract:

The relationship between bid-ask spreads, the presence of a futures market and dealer risk factors are analyzed. Size of bid-ask spreads can be determined when dealers trade in both futures and in spot market. Risk and futures price is associated with the number of dealers in the futures market.

Models, Futures market, Futures markets, Spot market

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