The Information Content of Prices in Derivative Security Markets

Journal Issue

Volume/Issue:: 1991/132
Series:: IMF Working Papers
Author(s):: Louis Scott
Publisher:: INTERNATIONAL MONETARY FUND
Published Date:: December 1991
DOI:: http://dx.doi.org/10.5089/9781451932553.001
ISBN:: 9781451932553
ISSN:: 1018-5941
Page:: 42

Prices in futures markets and option markets reflect expectations about future price movements in spot markets, but these prices can also be influenced by risk premia. Futures and forward prices are sometimes interpreted as market expectations for future spot prices, and option prices are used to calculate the market’s expectations for future volatility of spot prices. Do these prices accurately reflect market expectations? The purpose of this paper is to examine the information that is reflected in futures prices and option prices. The issue is examined by reviewing both the relevant analytical models and the empirical evidence.

Show Summary Details

You are not logged in and do not have access to this content. Please login or, to subscribe to IMF eLibrary, please click here

The Information Content of Prices in Derivative Security Markets