Journal ArticleDOI
Spot and Futures Prices of Nonstorable Commodities Under Rational Expectations
TLDR
In this article, the authors examined the effect of the presence of a commodity futures market upon the price formation process in a stochastic rational expectations framework and proposed an optimizing model with price uncertainty and risk aversion to solve equilibrium distributions of prices for nonstorable commodities.Abstract:
The paper examines the effect of the presence of a commodity futures market upon the price formation process in a stochastic rational expectations framework. An optimizing model with price uncertainty and risk aversion is used in order to solve equilibrium distributions of prices for nonstorable commodities. The existence of futures trading does not affect the degree of short-term spot price fluctuations. However, if the commodity market disturbance that originates from stochastic consumption demand is serially dependent, then the long-term price variation is smaller with a futures market than without it. Futures prices fluctuate less variably over time than spot and expected prices. Finally, there exists a futures intervention rule whereby the authority can stabilize spot prices and raise the overall welfare of society.read more
Citations
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Journal ArticleDOI
S&P 500 Cash Stock Price Volatilities
TL;DR: McSweeny and Hornstein this article showed that speculative trade in stock index futures and index options increased speculative activity that in turn destabilized the stock market, causing higher volatility.
Journal ArticleDOI
Integrating Long- and Short-Term Contracting via Business-to-Business Exchanges for Capital-Intensive Industries
Paul R. Kleindorfer,D. J. Wu +1 more
TL;DR: A general framework based on transactions cost economics is provided to provide review and synthesis of existing literature to explain various types of contracting linked to B2B exchanges in capital-intensive industries.
Journal ArticleDOI
Competitive Options, Supply Contracting, and Electronic Markets
D. J. Wu,Paul R. Kleindorfer +1 more
TL;DR: This paper develops a framework for analyzing business-to-business (B2B) transactions and supply chain management based on integrating contract procurement markets with spot markets using capacity options and forwards, providing conditions under which B2B exchanges are efficient and sustainable.
Journal ArticleDOI
Optimal bidding and contracting strategies for capital-intensive goods
TL;DR: The Seller's optimal bidding and Buyers' optimal contracting strategies in a von Stackelberg game with the Seller as the leader are derived and it is shown that Buyer's optimal reservation level follows an index that combines the Seller's reservation and execution cost.
Journal ArticleDOI
The determination of spot and futures prices with storable commodities
TL;DR: The authors analyzes the effects of futures trading in a market for a storable commodity, in which producers and speculators are assumed to be risk averse and specifications of the aggregate supply and inventory demand functions are derived from explicit optimization.
References
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Journal ArticleDOI
Rational Expectations and the Theory of Price Movements
TL;DR: In this article, the Stockholm School hypothesis is used to explain how expectations are formed in the context of an isolated market with a fixed production lag, and commodity speculation is introduced into the system.
Posted Content
Hedging and the Competitive Firm under Price Uncertainty
TL;DR: In this article, a risk-averse, competitive firm is assumed to face price uncertainty and must choose its level of output before the price uncertainty is resolved and may, at the same time, buy or sell output in a forward market at a fixed price.
Journal ArticleDOI
The Existence of Futures Markets, Noisy Rational Expectations and Informational Externalities
TL;DR: In this article, the role of futures markets as a place where information is exchanged and where people who collect and analyse information about future states of the world can earn a return on their investment in information gathering is explained.