We reconsider the issue of price discovery in spot and futures markets. We use a threshold error correction model to allow for arbitrage opportunities to have an impact on the return dynamics. We estimate the model using quote midpoints, and we modify the model to account for time-varying...

This paper investigates changes in the price discovery portions for two popular securities based on the S&P 500 index, namely the S&P 500 E-mini futures and the SPDR Exchange Traded Fund (Ticker SPY) for the period Jan 2002 through Dec 2013. We show a significant change in the price discovery of...

In light of the recently passed 2010 Dodd-Frank Act, we assess the effect of margin changes on prices, the risk-sharing between speculators and hedgers, and the price stability of 20 commodity futures markets. We find that margin increases decrease the rate at which prices change, yet they...

We present the "Tax Day Trade," a one day trade that gains an average of 1/2%. The trade was developed using the "Strategic Analysis of Markets Method (SAMM)" described in the two volume series "The Strategic Analysis of Financial Markets" (forthcoming from World Scientific). Detective work...

Using CFTC’s COT data, this letter analysed whether large hedgers and large speculators were influenced by major economic events of the 1990s. Eight major economics events are looked at over 10-year period, and findings support that these informed players were hardly affected by major events....

Implicit in interest rate derivatives are Arrow-Debreu prices (or state price densities, SPDs) that contain fundamental information for risk and portfolio management in interest rate markets. To extract such information from interest rate derivatives, we propose a non-parametric method to...

Market frictions such as transactions costs, funding constraints and short selling constraints limit arbitrage, but these frictions affect different stocks differently. Using intraday data on a liquid single stock futures and spot market, we examine the effect of these frictions on arbitrage...

We document both theoretically and empirically a major dependence in both the Information Shares (IS) and Component Shares (CS) approaches to the estimation of the price discovery metrics on the errors arising out of the inversion method of the option value to find the implied stock price. We...