We derive a closed-form expression for the differences between forward and futures prices in the framework of a Lucas (1978) equilibrium model. We calculate this difference for fixed-income securities in two ways: 1. Using historic interest rate data to calibrate the matrix of nominal state...

We analyze the impact of ongoing FDIC deposit insurance practices on how banks price risk. We show that FDIC insurance generally subsidizes risky loans, and that the subsidy increases with risk. We also show that the FDIC subsidy increases if contractually uninsured deposits are insured...

In a sequential general equilibrium with a single representative risk--averse consumer, stationary uncertainty, a one-period lag between investment and production, and concave production functions, we show that the forward price of a one-period real default-free bond one period hence is less...

A recent paper (Benninga-Protopapadakis 1994) considered a Lucas asset pricing model and showed that the pricing of forward and futures contracts was expressible as a simple matrix function. In this paper we derive limiting conditions for these differences and relate them to the eigenvectors of...