Pricing Term Structure Risk in Futures Markets

One-period expected returns on futures contracts with di erent maturities di er because of risk premia in the spreads between futures and spot prices.We analyze the expected returns for futures contracts with di erent maturities using the information that is present in the current term structure of futures prices.A simple a ne one-factor model that implies a constant covariance between the pricing kernel and the cost-of-carry can not be rejected for heating oil and German Mark futures contracts.For gold and soybean futures the risk premia depend on the slope of the current term structure of futures prices, while for live cattle futures the evidence is mixed.