Abstract / Description of output
We derive a formula for expected spot premia (ESPs) that can be computed from option prices. An ESP is shown to be an unbiased proxy for individual futures spot premia and can be an effective predictor of log returns on individual futures. An ESP outperforms conventional factors in predicting futures returns, and yields significant returns in several economic applications based on both cross-sectional and time series. We consider an ESP alone to be a strong factor in explaining futures returns.
Original language | English |
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Publication status | Published - 26 Jul 2023 |
Event | International Finance and Banking Society Conference 2023 - Saïd Business School, University of Oxford, Oxford, United Kingdom Duration: 24 Jul 2023 → 26 Jul 2023 https://www.ifabs.org/oxford2023 |
Conference
Conference | International Finance and Banking Society Conference 2023 |
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Country/Territory | United Kingdom |
City | Oxford |
Period | 24/07/23 → 26/07/23 |
Internet address |