The Hedging Performance of the New Futures Markets LOUIS H. EDERINGTON: ORGANIZED FUTURES MARKETS in financial securities were first established in the U.S. on October 20, 1975 when the Chicago Board of Trade opened a futures market in Government National Mortgage Association 8% Pass-Through Certificates. This was followed in January, 1976 by a 90 day Treasury Bill futures market on the International Monetary Market of the Chicago Mercantile Exchange. In terms of trading volume both have been clear commercial successes and this has led to the establishment, in 1977, of futures markets in Long Term Government Bonds and 90-day Commercial Paper and, in 1978, of a market in One-Year Treasury notes and new GNMA markets. The classic economic rationale for futures markets is, of course, that they facilitate hedging-that they allow those who deal in a commodity to transfer the risk of price changes in that commodity to speculators more willing to bear such risks. The primary purpose of the present paper is to evaluate the GNMA and TBill futures markets as instruments for such hedging. Obviously it is possible to hedge by entering into forward contracts outside a futures market, but, as Telser and Higinbotham  point
The Journal of Finance – Wiley
Published: Mar 1, 1979
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