Date of Award
Bachelor of Arts
Dr. Jerry L. Stevens
Dr. Andy Szakmary
The theoretical price of gold futures relies on the term structure of interest rates, the days to settlement, and the spot price of gold. However, when comparing the theoretical gold futures price and the observed price in the market, there is often a difference. The difference implies that the theoretical pricing model is incomplete. Though limited in explaining much of what causes a difference between the actual and theoretical futures prices, factors such as rise in the credit spread of interest rates and changes in the price of commodities are statistically significant and positively correlated determinants of the difference between theoretical and observed gold futures prices. Gold futures, primarily an investment and commercial instrument to hedge against inflation and unexpected changes in commodities, exhibit prices that differ from the theoretical price of its futures contract.
Riley, Edward M. III, "The Cost-of-carry model and volatility : an analysis of gold futures contracts pricing" (2014). Honors Theses. 861.