We propose and estimate fundamental models for natural gas prices. We compare how well these models, as well as univariate statistical time series models of NG prices and the NYMEX futures price for natural gas, forecast spot gas prices. We find that a univariate time series model that incorporates fundamental variables related to production, storage, weather, and aggregate output performs best...

This paper focuses on the impact of the 1997 Asian financial market crisis upon hedging effectiveness within the KOSPI 200 stock index and index futures markets. The paper utilizes the inter-temporal relationship between the two markets to examine the characteristics of several minimum variance hedge ratios. It also examines the performances of alternative hedging strategies for dynamic portfol...

Accurate forecasting of risk is the key to successful risk management techniques. Correct modelling of a variable’s extreme values located at the distributional tails accounting for the fat-tail phenomena is paramount, and this paper presents an overview of a theoretically and statistically robust approach to this problem. Underpinned by Extreme Value Theory that explicitly allows for fat-taile...

We use recently proposed tests to extract jumps and cojumps from three types of assets: stock index futures, bond futures, and exchange rates. We then characterize the dynamics of these discontinuities and informally relate them to U.S. macroeconomic releases before using limited dependent variable models to formally model how news surprises explain (co)jumps. Nonfarm payroll and federal funds ...

This study adopts derivative pricing as an indicator of market expectations, with those results suggesting that general investors can use market expectations to predict the final settlement value of underlying assets. Most investment textbooks note that one of the major functions of futures is price discovery. Similarly, the implied volatility associated with option prices can be used to discov...

Commodity loans are presented as an interpretation of spreads between spot and futures prices in commodity markets. This interpretation suggests an alternative to convenience yield as an explanation for the existence of large positive differences between spot and futures prices that are inconsistent with the usual arbitrage arguments. A model is presented in which an owner of a stock of a commo...

This study examines how speculative and hedging sentiments influence the returns volatilities of energy futures markets. We construct sentiment indices based on weekly data fund commercial positions four futures: crude oil, heating gasoline, natural gas, traded New York Mercantile Exchange (NYMEX) from 15 January 2013 to 5 February 2019. Our demonstrates that generates greater market fluctuatio...

This research paper investigates whether ICE futures contracts are an effective and affordable strategy to manage price risk for Canadian commodity producers in recent periods of high price volatility. Long memory in volatility is found to be present in cash and futures prices for canola and western barley. This finding is incorporated into the hedging strategy by estimating hedge ratios using ...