Can I read The Relationship Between Volume and Price Variability in Futures Markets on EtoBox?

The Relationship Between Volume and Price Variability in Futures Markets by Bradford Cornell is a Economics, Econometrics and Finance article available to read on EtoBox.

What is The Relationship Between Volume and Price Variability in Futures Markets about?

hen the future prices of commodities are known with certainty there is no reason to establish a futures market. Agents can construct a futures position in any commodity by borrowing or lending, since the future value of both the loan and the commodity are known. Uncertainty introduces two motives for futures trading. First, as Keynes (1930) and Hicks (1946) originally noted, uncertainty may produce a desire to transfer risk. Those with large endowments will want to hedge by taking short positions in the futures market, while those with future requirements will tend to go long. Even if endowments are identical, individuals will still want to trade if they have different risk preferences. Keynes, for instance, claimed that highly risk-averse individuals, the hedgers, would transfer the risk of carrying a commodity to less risk-averse individuals, the speculators. Under uncertainty, differential information provides the second motive for futures trading. In its original form, as presented by Working (1953), this theory points to the obvious fact that two individuals with different probability assessments regarding the future value of a commodity can both increase their utility ex ante

Who reads The Relationship Between Volume and Price Variability in Futures Markets?

Author

Bradford Cornell

Publisher

John Wiley and Sons; Wiley (John Wiley & Sons); John Wiley & Sons Inc.; Wiley (ISSN 0270-7314)

Published

1981

Language

EN

Field

Economics, Econometrics and Finance (Social Sciences)