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The pricing of stock index futures spreads at contract expiration
Author(s) -
Frino Alex,
McKenzie Michael D.
Publication year - 2002
Publication title -
journal of futures markets
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.88
H-Index - 55
eISSN - 1096-9934
pISSN - 0270-7314
DOI - 10.1002/fut.10013
Subject(s) - futures contract , stock index futures , financial economics , economics , maturity (psychological) , index (typography) , stock (firearms) , stock market index , econometrics , business , stock market , geography , context (archaeology) , psychology , developmental psychology , archaeology , world wide web , computer science
Abstract This paper conducts an empirical analysis of the mispricing of calendar spreads for stock index futures.Using recent data drawn from the Sydney Futures Exchange, a sharp increase in the magnitude of spread mispricingimmediately prior to maturity of the near contract is documented. This pattern in mispricing is related to asharp decline in open interest in the near contract and an increase in open interest in the deferred contract.Further, the direction of mispricing of the near and deferred contracts are more likely to move in oppositedirections as the near contract approaches maturity. These findings are consistent with the hypothesis thattraders seeking to roll‐over their positions from near to deferred futures contracts close to maturityincrease the magnitude of spread mispricing. © 2002 Wiley Periodicals, Inc. Jrl Fut Mark 22:451–469,2002