Futures Markets , Production and Diversification of Risk *
نویسنده
چکیده
This paper lays out a framework for the analysis of the risk transfer role of speculators on futures markets and the impact of their trading on the production decisions of firms. We show that when speculators diversify their portfolios over a large number of markets, the equilibrium risk premium converges to an asymptotic premium, the behaviour of which is determined by the stochastic dependence between the spot price and an index of average returns on other markets-the idiosyncratic risk arising from the variability of the spot price itself is diversified away. In the independent and negatively dependent cases this diversification of risk leads to a Pareto improving property. (” 1985 Academic Press. Inc
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