Parametric Bootstrap Tests for Futures Price and Implied Volatility Biases With Application to Rating Dairy Margin Insurance

We develop a new parametric bootstrap-based statistical test for presence of futures price and options-based implied volatility biases. The new test is applicable to data with overlapping prediction horizons. Information on anticipated volatility embedded in options prices is explicitly used when testing for futures price biases. Our method is well adapted to analysis of fast changing commodity markets as it does not rely on asymptotic theory and does not require a time series spanning several decades. We apply the new test to investigate if futures and options biases can explain very low loss ratios exhibited by USDA’s Livestock Gross Margin for Dairy Cattle insurance program.


Issue Date:
2014
Publication Type:
Conference Paper/ Presentation
PURL Identifier:
http://purl.umn.edu/170416
Total Pages:
60




 Record created 2017-04-01, last modified 2017-08-27

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