The Journal of Finance · 1990 · 19 citations · 3 references
BusinessEconomicsFinanceFinancial EconomicsFinancial MarketsInternational FinanceExchange Rate DeterminationExchange RatesForeign Exchange DerivativesForeign Exchange MarketsForeign Exchange OperationsFutures MarketsForeign Exchange Futures PricingForward Exchange TransactionsFutures Market StructureFutures Price RelationshipsFutures Pricing TheoryFutures-spot RelationshipTreasury Bill MarketsTreasury Markets
ABSTRACT C ornell and R einganum (1981) , hereafter CR, report that price differentials for future contracts and forward contracts are statistically insignificant in foreign exchange markets. Based on this finding, CR conclude that marking‐to‐market is insignificant in the formulation of currency futures prices. This note identifies two potential concerns with the CR tests. One problem relates to the timing of delivery dates for “matched” contracts. A second problem relates to the time period for the CR study. We show that correcting for these problems does not affect the overall conclusions of the CR study; marking‐to‐market does not appear to have a significant effect on currency futures prices.
3