Following Lence and Hayes (1994a), we study the problem faced by an Iowa farmer who wishes to hedge a soybean harvest using Chicago futures contracts. A time-series model for spot and futures prices is postulated, and numerical Bayesian procedures are used to calculate predictive densities and...

This paper studies the performance of the Foster-Whiteman (1999) procedure for using a Bayesian predictive distribution for the future price of an asset to compute the price of a European option on that asset. A technical contribution of the paper is the description of a sequential importance...

A dynamic model of strategic trading with two asymmetrically informed traders is analyzed where one informed trader knows the information seen by both informed traders, and the other informed trader only knows his private information. While the first informed trader is better informed, the...

This paper investigates whether customer order flow conveys information about future foreign exchange (FX) prices. We use a unique data set from a leading Australian commercial bank that records every FX trade made by the bank in the spot Australian dollar/US dollar market between 2005 and 2010....

This article develops a dynamic asset pricing model with persistent heterogeneous beliefs. The model features competitive traders who receive idiosyncratic signals about an underlying fundamentals process. We adapt Futia's (1981) frequency domain methods to derive conditions on the fundamentals...

We use recent statistical tests, based on a 'distance' between the model and the Hansen-Jagannathan bound, to compute the rejection rates of true models. For asset-pricing models with time-separable preferences, the finite-sample distribution of the test statistic associated with the...