Skip to main content
SpringerLink
Log in

Concentration on the nearby contract in financial futures markets: A stochastic model to explain the phenomenon

  • Published:
Journal of Economics and Finance Aims and scope Submit manuscript

Abstract

A stochastic model is developed to explain how the early unwinding propensity of market participants in financial futures markets can lead to a strong concentration of the trading volume on the nearby contract. In this model the position closing behavior of the market participants is captured by three distribution functions. The concentration process works under many realistic specifications of these distribution functions.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  • Admati, A., and P. Pfleiderer. 1988. “A Theory of Intraday Patterns: Volume and Price Variability”.Review of Financial Studies 1: 3–40.

    Article  Google Scholar 

  • Bamberg, G., and G. Dorfleitner. 1998. “Haltedauern von DAX-Futures-Positionen und die Konzentration auf den Nearby-Kontrakt”.Zeitschrift für Betriebswirtschaft, Ergänzungsband 2/98: 55–74.

    Google Scholar 

  • Bessembinder, H., and P. J. Seguin. 1993. “Price Volatility, Trading Volume, and Market Depth: Evidence from Futures Markets”.Journal of Financial and Quantitative Analysis 28: 21–39.

    Article  Google Scholar 

  • Brennan, M. J., and E. S. Schwartz. 1990. “Arbitrage in Stock Index Futures”Journal of Business 63: 7–31.

    Article  Google Scholar 

  • Bühler, W., and A. Kempf. 1995. “DAX Index Futures: Mispricing and Arbitrage in German Markets”.Journal of Futures Markets 15: 833–859.

    Article  Google Scholar 

  • Canoles, W. B., S. Thompson, S. Irwin, and V. G. France. 1998. “An Analysis of the Profiles and Motivations of Habitual Commodity Speculators”.Journal of Futures Markets 18: 765–801.

    Article  Google Scholar 

  • Duffie, D. 1990. “The Risk Neutral Value of the Early Arbitrage Option: A Note”.Advances in Futures and Options Research 4: 107–110.

    Google Scholar 

  • Foster, F. D., and S. Viswanathan. 1993. “Variations in Trading Volume, Return Volatility, and Trading Costs: Evidence on Recent Price Formation Models”.Journal of Finance 48: 187–211.

    Article  Google Scholar 

  • Kempf, A. 1998. “Short Selling, Unwinding, and Mispricing”.Journal of Futures Markets 18: 903–923.

    Article  Google Scholar 

  • Malliaris, A. G., and J. L. Urrutia. 1991. “Economic Determinants of Trading Volume”.Futures Markets, Economics Letters 35:301–305.

    Google Scholar 

  • Pagano, M. 1989. “Trading Volume and Asset Liquidity.”Quarterly Journal of Economics 104: 255–274.

    Article  Google Scholar 

  • Tashjian, E. 1995. “Optimal Futures Contract Design”.Quarterly Review of Economics and Finance 35(2): 153–162.

    Article  Google Scholar 

  • Yadav, P. K., and P. F. Pope. 1994. “Stock Index Futures Mispricing: Profit Opportunities or Risk Premia?”Journal of Banking and Finance 18: 921–953.

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Institut für Statistik und Mathematische Wirtschaftstheorie, University of Augsburg, D-86135, Augsburg

    Günter Bamberg & Gregor Dorfleitner

Authors
  1. Günter Bamberg
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Gregor Dorfleitner
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Günter Bamberg.

Additional information

The authors would like to thank Wolfgang Bühler (University Mannheim) and Michael Brennan (UCLA/Los Angeles) for valuable discussion and the Deutsche Forschungsgemeinschaft (DFG) for financial support.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Bamberg, G., Dorfleitner, G. Concentration on the nearby contract in financial futures markets: A stochastic model to explain the phenomenon. J Econ Finan 24, 246–259 (2000). https://doi.org/10.1007/BF02752606

Download citation

  • Issue Date:

  • DOI: https://doi.org/10.1007/BF02752606

Keywords

Search

Navigation