Standard models of hedging behavior assume that either hedgers wish to minimize net price variation or they wish to balance variation versus profits. These models treat variation as risk and fail to distinguish between variation that is random and variation that is not random over time. Newer...

This analysis examines a simultaneous estimation option-based approach to forecast futures prices in the presence of daily price limit moves. The procedure explicitly allows for changing implied volatilities by estimating the implied futures price and the implied volatility simultaneously. Using...