The argument that futures markets destabilize the prices of the underlying financial assets is an empirical question, but greater price volatility by itself is an undesirable attribute of a financial market.

Question

Quizplus · Accepted Answer

Greater price volatility in financial markets can be both desirable and undesirable, depending on the context. For traders and investors, volatility can present opportunities for profit through price movements. However, excessive volatility can also indicate uncertainty and risk, potentially deterring investment and destabilizing markets. The desirability of volatility is therefore not absolute but depends on the perspective and objectives of market participants.

The Argument That Futures Markets Destabilize the Prices of the Underlying