Forward and Futures Prices during the 1984/85 Sterling Exchange Rate Crisis: An Analysis of Time Series Structure and Implied Transactions Costs

Abstract

Whereas the last decade has seen remarkable growth in United States (US) futures business, in the United Kingdom (UK) the volume in some sectors has been disappointing. Although new markets are continuing to appear (such as the Baltic International Freight Futures Exchange, BIFFEX, which opened for business in May 1985), on 31 January 1985 the London Gold Futures Market (LGFM) announced its intention to close and from time to time there has been speculation that LIFFE, the London International Financial Futures Exchange, may not be able to continue in its present form because of lack of business (although the range of traded instruments continues to expand). Some factors that would tend to discourage business are: