Abstract
This article is the first to study empirically the pricing of the Euro Stoxx 50 dividend futures, introduced at the European Exchange (Eurex) in mid-2008. These instruments are an easy means of obtaining exposure to the future dividends of the index constituents for hedging and speculation purposes. Trading figures thus far show a viable interest of market participants in this innovation. Based on straightforward and model-free replication arguments, this study compares prices of the dividend futures to those of hedging portfolios built on exchange-traded index options. The analysis shows substantial pricing imbalances, and hence violations of arbitrage relations between both derivatives markets for a set of contract maturities. This phenomenon cannot be fully explained by transactions costs and other potential trading constraints.
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