Question
A derivative is an asset whose value is based on some other asset. For example a futures contract for oil has a value that depends
A "derivative" is an asset whose value is based on some other asset. For example a futures contract for oil has a value that depends on the actual price for oil at some point in the future. Derivatives can be used to speculate on future prices and hedge the risk of price changes. But can they be used to forecast? We've seen in this section that prices contain information and so maybe derivative prices contain information about the future. Let's see.
- Read this shortreport from two economists at the Federal Reserve
https://www.stlouisfed.org/publications/regional-economist/january-2002/the-futures-market-as-forecasting-tool-an-imperfect-crystal-ball
- Pick an industry that you think might benefit from being able to forecast prices or something similar and find describe what speculative markets you might look at to forecast.
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