Premium
The price path due to order imbalances: evidence from the Amsterdam Agricultural Futures Exchange
Author(s) -
Pennings Joost M. E.,
Kuiper W. Erno,
Hofstede Frenkel ter,
Meulenberg Matthew T. G.
Publication year - 1998
Publication title -
european financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.311
H-Index - 64
eISSN - 1468-036X
pISSN - 1354-7798
DOI - 10.1111/1468-036x.00053
Subject(s) - futures contract , futures market , order (exchange) , forward market , economics , financial economics , hedge , agriculture , finance , ecology , biology
The lack of sufficient market depth particularly in many newly initiated futures markets results in relatively high hedging costs, and this inhibits the growth of futures contract volume. In this article the price path due to order imbalances is analyzed and a two‐dimensional market depth measure is derived.Understanding the underlying structure of futures market depth provides the management of the futures exchange with a framework for improving their market depth and gives hedgers a better understanding of market depth risk. The managerial implications of our findings are demonstrated empirically using data from the Amsterdam Agricultural Futures Exchange.