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The purpose of this research is to determine whether the trading of equity index futures contracts on the South African Futures Exchange (SAFEX) results in an increase in the volatility of the underlying spot indices. Since equity index futures contracts were first listed in the USA in 1975, various studies have been undertaken to determine whether the volatility of shares in the underlying indices increases as a result of the trading of such futures contracts. These studies have lead to the development of two schools of thought: [a] Trading activity in equity index futures contracts leads to an increase in the volatility of index shares. [b] Trading activity in equity index futures contracts does not lead to an increase in the volatility of the index shares and could in fact lead to greater stability in equity markets. Although some evidence of higher volatility in expiration periods was found, volatility in the expiration periods was not consistently higher than in the corresponding pre‐expiration period.

This paper aims to develop hedging strategies using both futures and forward contracts and issuing risky debt when financially constrained firms are forced to operate in long horizon.

The authors present a model for developing hedging strategies using both futures and forward contracts and issuing risky debt. A theoretical model employing stochastic differential equations for forward hedging is illustrated with a numerical example over parameter values consistent with the literature.

A financially constrained firm with limited cash balance must hedge its liquidity with both future and forward contracts and issue risky debt to support its long-term operations. The firm can issue a minimal amount of risky debt by adding forward contracts into hedging and can increase its value higher than that when hedging with only futures contracts. We show numerically that hedging with both futures and forward contracts allows the firm to issue minimal risky debt in increasing its firm value.

When Metallgesellschaft nearly collapsed in 1993, it offered long-term forward contracts to its customers and attempted to hedge its risk by rolling over series of short-term futures contract. It created the situation of inherent mismatch in maturity structure. A financially constrained firm operating in a long horizon appears to commit its liquidity as long-term forward contracts, which cannot be fully hedged with series of futures contacts. The firm should hedge its liquidity with both futures and forward contracts and avoid liquidation with deadweight costs in its long-term operation.

This is the first study examining hedging strategies with both futures and forward contracts.

This paper aims to compare and contrast the concept of conventional futures contract from the Islamic law of contract perspectives. The underlying theory and practice of Islamic finance is based on the principles of Islamic law of contract. Although the necessity of derivative instruments such as the case with futures contract is essential for developments in Islamic finance, the permissibility of using these instruments still remains a debatable issue.

The paper discusses arguments for and against using derivative instruments as in futures, for example, in light with the Qur’an and Sunnah (the Prophet’s traditions), as well as the views of classical scholars, jurists and contemporary researchers. Arguments for and against are analysed systematically to derive a logical conclusion.

The study finds that majority scholars consider futures contracts as non-compliant with the Islamic law due to the fact that selling something that does not exist, deferment in the both counter values, gharar or ambiguity and excessive risk taking, pure speculation and sale of one debt for another.

The study focuses narrowly on conventional futures contract. Analysing other financial derivative contracts could be a future research endeavour.

The study has so far found the verdict of impermissibility of conventional futures contract in its current form as has been argued by majority scholars in the premise that they do not comply with the Islamic law. Policymakers and industry practitioners need to take this opinion of majority scholars while developing new Islamic financial derivatives.

To the best of the author's knowledge, the present research is the first attempt so far that explained the validity of conventional futures by analysing arguments of classical and contemporary jurists, scholars and researchers.

Introduction In a world of increased uncertainty about the future value of exchange rates and increased visibility of foreign exchange gains and losses, it is not surprising that both commercial and financial firms have become more concerned about minimizing foreign exchange risks. Once a company becomes involved in international trade, be it the formation of a foreign subsidiary or simply the import or export of goods, it subsequently becomes subject to foreign exchange risk exposure. Foreign exchange risk exposure can be broken down into three categories for further development; these are real economic exposure, translation exposure, and transaction exposure.

The purpose of this paper is to test for bubbles in the US hard red spring (HRS) wheat market from 2004 to 2014, with particular focus on 2007-2008 when the market experienced record-high price volatility.

The authors apply a recently developed bubble testing procedure to cash, rolling nearby futures contract, and individual futures contract prices of HRS wheat sampled at daily, weekly, and monthly frequencies. Two critical value (CV) sequences are derived to date-stamp bubbles, one from Monte Carlo simulations, and the other from recursive wild bootstrap procedure.

The authors find that regardless of the price series adopted, sampling frequency chosen, or CVs used, bubbles account for only a small fraction of the HRS wheat price behavior during 2004-2014. However, much sharper differences are detected regarding the key policy question of bubble behavior during 2007-2008. Individual futures contract prices during this period suggest only a minimal number of bubble days, while rolling nearby futures and cash prices indicate bubbles lasting much longer. Since theory suggests that prices for individual futures contracts are more likely to provide a clearer test of bubble components, the authors conclude there is little evidence that the spike in spring wheat prices to $25 per bushel in 2007-2008 was a bubble.

This paper is the first in the literature to examine the sensitivity of bubble testing to different types of data, sampling frequencies, and inference procedures.

Adoption rates of commodity futures contracts among farmers are rather low in Europe despite their political support. The purpose of this paper is to examine whether the Technology Acceptance Model (TAM) can contribute to the understanding of farmers’ intention to use commodity futures contracts. Here, the authors explicitly distinguish between usage motives for price risk reduction and speculation.

The study is based on an online survey with 134 German farmers using partial least squares structural equation modeling to estimate the TAM.

The intention to use commodity futures contracts is mostly driven by farmers’ motivation for speculation rather than price risk reduction. Assuming risk averse farmers, this result could explain low adoption rates. Furthermore, perceived ease of use has a positive effect on the intention to use commodity futures contracts.

Handling of price hedging instruments should be facilitated to increase farmers’ adoption. Effective marketing trainings, which can demonstrate the ability of commodity futures contracts to reduce price risk, could increase farmers’ motivation to use them for their risk management instead of speculation.

This study analyzes path relationships between constructs expected to influence the intention to use commodity futures contracts which are allowed to be estimated by the TAM in one model. Here, the authors explicitly distinguish between usage motives for price risk reduction and speculation. This is the first study applying the TAM to price risk management tools.

The financial services industry is one of the fastest growing service industries. The financial services industry includes financial derivatives markets such as options and futures markets. In order to ensure survival, firms providing financial services show a rapid product innovation. However, for financial services the risk of failure is considerable. Argues that a synthesis between the financial approach and the marketing approach towards financial services provides a conceptual framework for analysing the possible success or failure of futures contracts. The synthesis is illustrated by an empirical study of a new futures contract that might possibly be introduced.

The purpose of this study is to provide further evidence on the importance of international diversification, and to determine the optimal allocation of assets in a portfolio comprising domestic (Australian) and international assets. The study focuses on stock index futures contracts in five countries ‐ Australia, USA, UK, Hong Kong and Japan. Daily data for the five selected contracts over the period from 1 January 1990 to 31 December 2000 is employed in the study. Consistent with previous studies, the results confirm the importance of international diversification and indicate that the portfolio risk is reduced considerably when more international assets are added sequentially to the portfolio. Empirical analysis also shows that the optimal asset allocation results in higher risk reduction and better returns when compared with an equally weighted portfolio.

Fundamentally, a commodity exchange, such as the New York Mercantile Exchange, serves a dual purpose. The first is hedging price risk, in which the exchange offers a fair and orderly market for shifting risk via the trading of future obligations. The second major function is price discovery, in which the exchange provides a centralized, open, and liquid forum for buyers and sellers to conduct business, by which the prices of all transactions conducted on the exchange are publicly disseminated. This article surveys the role of exchange traded futures and options contracts within the worldwide energy markets and the concepts, applications, and strategies that have evolved to a level of sophistication and versatility that could not have been foreseen 150 years ago.