Title: Price discovery and risk transfer in the Brent crude oil futures market
Authors: Saada Abba Abdullahi; Zahid Muhammad
Addresses: Department of Agricultural Economics and Extension, Kano University of Science and Technology Wudil, P.M.B 3244, Kano, Nigeria ' College of Business Administration, University of Dammam, P.O. Box 1982, Dammam, Saudi Arabia
Abstract: This paper examines price discovery and risk transfer functions in the Brent crude oil futures market. The results show that the spot and futures prices play a significant role in price discovery but the contribution of futures price are higher at different maturities. Second, the results of cross-contract analysis indicate that futures contract with longer maturity lead price discovery in the oil market. Finally, the crude oil futures price does not perform the risk transfer function in interaction with the spot price in various maturities and between different futures contracts. The findings have important implications for market participants and policy makers.
Keywords: Brent crude oil; futures markets; price discovery; risk transfer; spot prices.
DOI: 10.1504/IJFMD.2016.076974
International Journal of Financial Markets and Derivatives, 2016 Vol.5 No.1, pp.23 - 35
Received: 03 Jun 2014
Accepted: 08 Apr 2015
Published online: 16 Jun 2016 *