Futures Expiration, Contract Switching, and Price Discovery

Abstract

“Futures markets have the interesting feature that contracts mature regularly. This affects both hedgers, who regularly need to roll over their futures positions into later contract months, and researchers, who want to understand the linkage between futures and the underlying cash markets. In this article, Chatrath and Christie-David take a very close look at five commodity futures markets and develop interesting results on how prices and volume behave as the nearest contract reaches maturity and trading rolls over into the next one.”