Does Futures Price Volatility Differ Across Delivery Horizon?
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We study the difference in the volatility dynamics of CBOT corn, soybeans, and oats
futures prices across different delivery horizons via the smoothed Bayesian estimator
of Karali, Dorfman, and Thurman (2010). We show that the futures price volatilities
in these markets are affected by the inventories, time to delivery, and the crop progress
period. Some of these effects vary across delivery horizons. Further, it is shown that
the price volatility is higher before the harvest starts in most of the cases compared to
the volatility during the planting period. These results have implications for hedging,
options pricing, and the setting of margin requirements.