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Arbitrage relation in the corn futures prices of Japan and US

Society of Business and Commerce, Keio University
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  • Commodity Futures
  • Transportation Cost
  • Arbitrage
  • Corn


This paper aims to analyze empirically how the price of commodity futuresmarket in Japan is related to an overseas futures price of the same commodity.First,whether the arbitrage activities between the Tokyo Grain Exchange and the ChicagoBoard of Trade work with respect to corn futures is examined. After the usualstatistical test on the arbitrage relation hypothesis among the coefficients of thelogarithmic TGE price regression on the logarithmic CBOT price and forwardexchange rate, this paper uses data of unit transportation cost, which has beenneglected so far. By using the C&F premium, the theoretical arbitrage value of theimported corn price can be directly compared with the TGE corn price.

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