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The Information Content of Prices in Derivative Security Markets
Author:
Louis O. Scott null

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Series:
IMF Working Papers
Volume/Issue:
Volume 1991: Issue 132
Language:
English
Publication Date:
01 Dec 1991
DOI:
https://doi.org/10.5089/9781451932553.001
ISBN:
9781451932553
ISSN:
1018-5941
Pages:
42
Keywords:
WP; futures price; spot price; interest rate; risk premium; forward price; term structure; Treasury bond futures; futures option; spot market; stock index; futures settlement price; CIR price futures; dividend yield; Futures; Asset prices; Options; Return on investment; Stocks
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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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.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund