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Concentration on the nearby contract in financial futures markets: A stochastic model to explain the phenomenon

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  • Günter Bamberg
  • Gregor Dorfleitner

Abstract

A stochastic model is developed to explain how the early unwinding propensity of market participants in financial futures markets can lead to a strong concentration of the trading volume on the nearby contract. In this model the position closing behavior of the market participants is captured by three distribution functions. The concentration process works under many realistic specifications of these distribution functions. Copyright Springer 2000

Suggested Citation

  • Günter Bamberg & Gregor Dorfleitner, 2000. "Concentration on the nearby contract in financial futures markets: A stochastic model to explain the phenomenon," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 24(3), pages 246-259, September.
    • Handle: RePEc:spr:jecfin:v:24:y:2000:i:3:p:246-259
    DOI: 10.1007/BF02752606
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    References listed on IDEAS

    as
    1. Foster, F Douglas & Viswanathan, S, 1993. "Variations in Trading Volume, Return Volatility, and Trading Costs: Evidence on Recent Price Formation Models," Journal of Finance, American Finance Association, vol. 48(1), pages 187-211, March.
    2. W. Bruce Canoles & Sarahelen Thompson & Scott Irwin & Virginia Grace France, 1998. "An analysis of the profiles and motivations of habitual commodity speculators," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 18(7), pages 765-801, October.
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