Lecture 22 - Stock Index, Oil and Other Futures Markets

author: Robert J. Shiller, Department of Economics, Yale University
recorded by: Yale University
published: Oct. 7, 2009,   recorded: March 2008,   views: 3574
released under terms of: Creative Commons Attribution No Derivatives (CC-BY-ND)
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Description

Futures markets have expanded far beyond their initial application to farmer's planting and harvest cycles. These markets now allow investors and traders to set prices for a broad spectrum of assets and for a whole term structure stretching into the distant future. Some of these markets are often priced according to simple fair-value formulae, others are not. Futures markets can be in backwardation, where the future price is lower than the present, spot price. They can also be in contango, where the price rises with maturity and is higher in the future than it is today. The S&P/Case-Shiller Home Price Index is a recent invention that has transferred the mechanics of futures markets to the prices of single-family homes in ten real estate markets, in an effort to create a national market for residential real estate.

Reading assignment:

Fabozzi et al. Foundations of Financial Markets and Institutions, chapter 29

Resources:

PowerPoint slides from screen - Lecture 22 [PDF]

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