Futures market equilibrium with heterogeneity and a spot market at harvest
نویسندگان
چکیده
This paper studies equilibrium in the futures market for a commodity in a single good economy, which is populated by heterogeneous producers and speculators. The commodity is traded only in the spot market at harvest whereas futures contracts written on the commodity are traded continuously. The model illustrates the role of heterogeneity and non-tradeness in a futures market equilibrium. The results show that the futures price is driven by aggregate wealth, rather than the spot price as in other models and that the futures price process is a simple one which depends on the relative risk process. ( 2001 Elsevier Science B.V. All rights reserved. JEL classixcation: C61; G13
منابع مشابه
Price Relations on Future Storable Comma
This paper presents a simple theoretical modei of the spot and futures markets for a storable commodity. We focus our attention in particular on the classical futures markets, those for harvested storable commodities. For these commodities which include grains such as wheat, corn, and soybeans, while there is active trading on the spot and futures markets at each instant, the output of the prod...
متن کاملThe Dynamics of Commmodity Spot and Futures Markets: a Primer
I discuss the short-run dynamics of commodity prices, production, and inventories, as well as the sources and effects of market volatility. I explain how prices, rates of production, and inventory levels are interrelated, and are determined via equilibrium in two interconnected markets: a cash market for spot purchases and sales of the commodity, and a market for storage. I show how equilibrium...
متن کاملThe Dynamics of Commodity Spot and Future Markets: A Primer
I discuss the short-run dynamics of commodity prices, production, and inventories, as well as the sources and effects of market volatility. I explain how prices, rates of production, ana’ inventory levels are interrelated, and are determined via equilibrium in two interconnected markets: a cash market for spot purchases and sales of the commodity, and a market for storage. I show how equilibriu...
متن کاملOptimal Hedging and Equilibrium in a Dynamic Futures Market*
This paper solves the optimal futures hedging problem in several simple continuous-time settings, and examines the resultant equilibrium in one case. Spot and futures prices are described by vector diffusion processes. A hedge is a vector stochastic process specifying a futures position in each futures market. Hedging profits and losses are marked to market in an interest-bearing (or interest-p...
متن کاملThe Role of Observability in Futures Markets
Allaz and Vila (1993) show that oligopolistic industries may become more competitive if a futures market is added previous to the spot market. Later, Hughes and Kao (1997) show that this result occurs only if positions in the futures market are observed, and that without this condition the result is again the Cournot equilibrium. In this work we study different explicit formulations of observab...
متن کامل