Examining the Relationship Between Spot Price of an Underlying Asset and Cost of Carry of Gold Coin Futures in Iran Mercantile Exchange (IME)

Subject Areas : Journal of Investment Knowledge

Majid Shariatpanahi ¹ , Hadi Mohammadzadegan ² , Safoora Shahini ³

1 - Assistant professor of Allameh Tabataba’i University
2 - Master of Financial Management in University of Economic Sciences
3 - Master of Financial Management in University of Economic Sciences

Received: 2013-07-30 Accepted : 2014-01-03 Published : 2014-01-03

Keywords: Cost of carry, Spot price, Gold coin futures contract, Hedger, Arbitrager,

Abstract :

An asset can be maintained for consumption or investment incentives. If a futures contract's market exist for an asset, the relationship between spot price of an underlying asset and cost of carry would be considered. Investigating this relationship is important in term of being beneficial for arbitrager and hedger. This study aims to examine the relationship between these two variable by investigating spot price of gold coins futures contract's during 3 years. This test will be performed by using GARCH method and based on BCSS's group model (1996). The results indicate the negative relationship between spot price of gold coin and net cost of carry for majority of maturity.