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Showing papers on "Spot contract published in 1982"


Journal ArticleDOI
TL;DR: In this paper, a new concept of electricity pricing referred to as "spot pricing" is presented and a set of rates related to optimal spot prices are proposed and their applicability is discussed in view of different customer characteristics, metering, and communication costs.
Abstract: A new concept of electricity pricing referred to as "spot pricing" is presented. Spot pricing is shown to encompass and achieve more fully the objectives of load management techniques and other rate structures proposed so far. The contribution of this paper is the derivation of optimal spot prices and a discussion of and proposals on a number of implementation issues which arise when the theory of spot pricing is turned into practice. A set of rates related to optimal spot prices are proposed and their applicability is discussed in view of different customer characteristics, metering, and communication costs. The impact of spot pricing on line losses and reactive energy, the quality of supply and rationing is elaborated. Issues related to customer response, utility revenues, investments and generation deregulation are also discussed.

342 citations


Journal ArticleDOI
TL;DR: This article developed a model in which current account imbalances can be "financed" through transfers of bonds denominated in either currency, and link the current spot rate to the expected future spot rate via a risk premium, which depends on the global currency mix of outside assets that governments impose on private portfolios through budget deficits and interventions.

80 citations


Journal ArticleDOI
TL;DR: The algorithm's usefulness to produce optimal spot price forecasts that may induce socially efficient investments in non-utility-owned generation and to facilitate empirical studies on the income distributional impact of spot price implementation is also discussed.
Abstract: This paper is a follow-up of previous work on optimal spot pricing of electricity [3]. The issue of long-term planning in the electric utility industry as it relates to the adoption of socially optimal spot pricing is considered. Optimal investment conditions are derived and an algorithm is developed which allows integration of these conditions into long-term planning. The proposed algorithm is an extensionl of Bootht-aleriaux probabilistic production costingand thus exhibits high computational efficiency. It provides the building block forincorporating spot pricing into a number of mathematical programminaf methodologies currently used in generation expansion planning studies. The algorithm's usefulness to produce optimal spot price forecasts that may induce socially efficient investments in non-utility-owned generation and to facilitate empirical studies on the income distributional impact of spot price implementation is also discussed.

80 citations


Journal ArticleDOI
TL;DR: In this article, it was shown that the market clearing prices reported to prevail for petroleum products on the principal petroleum spot market at Rotterdam are the primary determinants of changes in official crude prices.
Abstract: The hypothesis of this paper is that crude oil, like any other unfinished commodity, is valued for the products derived from it; the purpose is to offer an empirical explanation for changes in the crude price charged by the members of OPEC. The model results show that the market-clearing prices reported to prevail for petroleum products on the principal petroleum spot market at Rotterdam are the primary determinants of changes in official crude prices. A systematic relationship between offical and spot prices is argued to have prevailed since 1974. An appendix clarifies five types of data required for the model. 13 references, 4 tables.

56 citations


Journal ArticleDOI
TL;DR: In this article, the authors test whether forward prices equal the traders' expectations of the future spot prices at maturity, under two different models of expectations formation: full information rational expectations and incomplete information mechanical forecasting rule.
Abstract: This paper tests whether forward prices equal the traders' expectations of the future spot prices at maturity, under two different models of expectations formation: full information rational expectations and incomplete information mechanical forecasting rule. The tests are performed, over the period January 1970 through September 1980, on the forward markets for the primary metals-copper, tin, lead, and zinc-traded in the London Metals Exchange. We find evidence consistent with the existence of time varying risk premia. THE WAY IN WHICH traders form expectations about future price is of great interest to economists as well as to market participants, and forward prices have often been used as indicators of these otherwise unobservable expectations. Forward prices, however, include not only the expectation of future spot prices but also a component reflecting the riskiness of the contract. Therefore, the risk premium can be defined as the difference between the forward price and the expected future spot at the maturity date of the forward contract.' There is a longstanding debate on the nature of this risk premium. The HicksKeynes view2 is that in futures markets speculators provide insurance against the risk of fluctuations in the price of the spot commodity, and hedgers pay a premium for this risk transfer in the way of a forward price that is higher than the expected spot price. In other words the risk premium should be positive.3 Hardy [11] has suggested, however, that a future market is merely a casino in which speculators can participate in a legalized form of gambling. For this privilege they have to pay a price in the form of a negative expected return, thus resulting in a negative risk premium.4

50 citations


ReportDOI
TL;DR: In this article, a joint model of the autoregressions and exchange rate forecasting equation is proposed for the L UK/$US and DM/$US exchange rates from the recent floating rate period.
Abstract: Many models of exchange rate determination imply that movements in money supplies and demands should result in movements in exchange rates. Hence, if rational agents are attempting to forecast exchange rate movements, they should in the first instance forecast movements in the supplies of and demands for money balances. Furthermore, if these underlying variables follow some stable autoregressive processes agents should use those processes to make their forecasts. If we identify the forward rate with the market's expectation for the future spot rate, rationality of expectations will imply testable cross-equation restrictions in a joint model of the autoregressions and exchange rate forecasting equation. This strategy is implemented in the paper using data on the L UK/$US and DM/$US exchange rates from the recent floating rate period.

17 citations


Posted Content
TL;DR: In this article, a joint model of the autoregressions and exchange rate forecasting equation is proposed for the L UK/$US and DM/$US exchange rates from the recent floating rate period.
Abstract: Many models of exchange rate determination imply that movements in money supplies and demands should result in movements in exchange rates. Hence, if rational agents are attempting to forecast exchange rate movements, they should in the first instance forecast movements in the supplies of and demands for money balances. Furthermore, if these underlying variables follow some stable autoregressive processes agents should use those processes to make their forecasts. If we identify the forward rate with the market's expectation for the future spot rate, rationality of expectations will imply testable cross-equation restrictions in a joint model of the autoregressions and exchange rate forecasting equation. This strategy is implemented in the paper using data on the L UK/$US and DM/$US exchange rates from the recent floating rate period.

15 citations


01 Jan 1982
TL;DR: In this paper, the authors derive conditions under which the sale of SPR futures contracts leads to a more favorable trajectory of spot prices than does the selling of an equivalent amount in the spot market, and quantify their results by simulating both SPR drawdown strategies in a model of the world oil market and the US economy.
Abstract: The rapid increases in the price of crude oil during the last two supply disruptions can be attributed in part to the increases in demand for private inventories, which were stimulated by expectations of still higher prices (and hence speculative profits) in the future. The Strategic Petroleum Reserve (SPR) can dampen this speculative demand for inventories by selling futures contracts in SPR oil. By guaranteeing a supply of oil at a future date, the government lowers the expected future price which, in turn, lowers the current spot price by reducing inventory demand. Using a theoretical model, the authors derive conditions under which the sale of SPR futures contracts leads to a more favorable trajectory of spot prices than does the sale of an equivalent amount in the spot market. They quantify their results by simulating both SPR drawdown strategies in a model of the world oil market and the US economy. The results indicate that the sale of SPR futures can play a significant role in dampening the harmful effects of a disruption. Moreover, by selling futures contracts the government can postpone, and in some events avoid, physical withdrawal of oil from the reserve, which makes the case for thismore » drawdown strategy that much more compelling. 5 figures, 2 tables.« less

12 citations


Journal ArticleDOI
TL;DR: In this article, the authors employ a model based on incomplete markets in certainty claims and show that the relative magnitudes of the futures price, pf, and the expected future spot price, E(P), are determined by the business transactions of, and markets available to, those economic units with a commercial or production interest in the commodity.
Abstract: Normal backwardation, the hypothesis that futures prices "normally" lie below expected future spot prices, was justified by Keynes [6] and Hicks [2] by the contention that speculators, while risk averse, are less so than hedgers. Consequently, hedgers pay speculators to bear that hedgers' risk. Houthakker [5] supported this view arguing that according to all available data short hedging (and conversely long speculation) is the more common type. Working [9] favored the view that futures prices are unbiased predictors of future spot prices. If this is true, hedgers are not, on average, paying to reduce their risk nor are speculators, on average, earning a premium for assuming risk. Risk averse speculators will participate in such a market only if there are nonhomogeneous beliefs regarding the expected spot price. The level of futures prices is important not only because it determines the cost of hedging, but also because it influences production decisions. In light of the competing views in the literature of both the level of futures prices and the factors which determine them, we will analyze these issues in this paper. To do so, we employ a model based on incomplete markets in certainty claims. In this, and other respects identified later, the model parallels existing futures markets in agricultural commodities. The analysis shows, in the absence of speculators, that the relative magnitudes of the futures price, pf, and the expected future spot price, E(P), are determined by the business transactions of, and markets available to, those economic units with a commercial or production interest in the commodity. This defines the conditions under which there is a role for speculators even if they have the same degree of risk aversion and share the expectations of other market participants. Thus, neither differences in degrees of risk

11 citations


Journal ArticleDOI
Soo-Bin Park1
TL;DR: In this paper, the efficiency of the Canadian Treasury bill market with data on spot and forward rates of return was examined with data from the Bank of Canada (BoC) for the period from 7/62 to 3/79, and it was found that the forward rate contained some information about future spot rates above and beyond that in past spot rates.

11 citations


01 Feb 1982
TL;DR: This paper showed that futures markets offer better insurance to producers than price stabilization schemes except when the producer has a very low correlation between his output and the world price, and that a price guarantee scheme operated by a domestic marketing board offers such a small improvement in income insurance that such benefits will almost certainly be offset by costs of operating such a scheme.
Abstract: This paper concludes that futures markets offer better insurance to producers than price stabilization schemes except when the producer has a very low correlation between his output and the world price. In this case, however, a price guarantee scheme operated by a domestic Marketing Board offers such a small improvement in income insurance that such benefits will almost certainly be offset by costs of operating such a scheme. Although government intervention seems unattractive for small price taking countries, it will be attractive to large producers, since this intervention can take the form of restricting supply to increase the spot price, and of manipulating the futures market. Large producers benefit from making the futures market less attractive to small producers and, therefore, increasing their risk and reducing supply. The large producer may also find it attractive to manipulate the futures market in a predictable way to increase his profits. Ths paper shows that if all producers face pure demand risk, then large commodity producers have no special reason other than financial size for speculating in the futures market; but if all producers face correlated supply risk, then the large producer benefits from manipulating the futures market.

Journal ArticleDOI
Mario Levis1
TL;DR: In this paper, the efficiency of the Australian official forward exchange market is tested for the period September 1974 to June 1981 and the results indicate that while the 90-day US dollar forward rate was an unbiased predictor of the future spot rate for the whole period as a whole, substantial differences between the two rates have been evident over prolonged short run periods.
Abstract: The efficiency of the Australian official forward exchange market is tested for the period September 1974 to June 1981. The results indicate that while the 90-days US dollar forward rate was an unbiased predictor of the future spot rate for the period as a whole, substantial differences between the two rates have been evident over prolonged short-run periods. Such evidence raises some important policy questions about the existing arrangements in the forward exchange market.

01 Jan 1982
TL;DR: In this paper, Bohn et al. presented a specific proposal for a deregulated power system, based on a real-time spot energy marketplace, and analyzed its practical engineering and economic functions and issues.
Abstract: Deregulating the Electric Utility Industry" Roger E. Bohn, Richard D. Tabors, Bennett W. Golub, Fred C. Schweppe Utility Systems Program MIT Energy Laboratory Many functions must be performed in any large electric power system. A specific proposal for a deregulated power system, based on a real-time spot energy marketplace, is presented and analyzed. A central T&D utility acts as a market maker, setting prices to equilibrate supply and demand. Decentralized competitive firms invest and operate in response to current and projected spot prices. The paper explicitly addresses the many practical engineering and economic functions and issues which must be taken into account by any proposal to deregulate electric power generation. It does not answer the question of whether deregulation is a

Journal ArticleDOI
TL;DR: In this paper, a new argument for stability of the exchange rate on the spot market based on the transactions demand for money is presented. But the argument is not applicable to the case of the currency market.

Journal ArticleDOI
01 Nov 1982
TL;DR: In this paper, Batra and Hadar argued that the existence of forward markets allows the binational firm to separate the production, export and sales decisions from the forward market hedging decision, which is counterintuitive since they claim that the impact of fluctuating exchange rates-depends crucially on the firm's expectation about the expected future spot rate and the marginal cost functions (MC's).
Abstract: BATRA and Hadar's' paper examines the impact of various exchange rate regimes on the decision made by multinational (binational) firm. In their analysis of floating exchange rates they examine the significance of the forward exchange market. In this context their results and conclusions are counterintuitive since they claim that: "the impact of fluctuating exchange rates-depends crucially on the firm's expectation about the expected future spot rate (e) and the marginal cost functions (MC's). Thus, for example when the firm expects the exchange rate to exceed the cost of forward exchange i.e., e > q (where q is the forward exchange rate) and all marginal costs are rising, then home sales are increased while foreign sales and export are decreased, and at the same time, the firm reduces its production at home, and increases abroad."2 In this note we show that Batra and Hadar (abbreviated B & H) err in their conclusion, by arguing that the existence of forward markets allow the binational firm to separate the production, export and sales decisions from the forward market hedging decision. For a given current forward exchange rate, the management of the firm may treat foreign operation profits as if they were certain, since the firm can engage in forward sales of foreign currency resulting from foreign profits at the prevailing rate. The main implication is that the production and export decisions can be made based upon the forward rate and is independent of the uncertainty of the future spot rate, and consequently independent of the management degree of risk aversion. Given the domestic and foreign profits resulting from the production and export decisions the management has to determine the mix between covered and uncovered foreign profits. The relevant variables for this decision are: the current forward rate, the subjective future expected spot rate, and the degree of risk aversion of the firm's management. This sequence for the decision making process of the binational firm contrasts with Batra and Hadar's conclusions that the desired amount of forward cover is determined jointly with other decisions. A formal derivation of these results follows. To facilitate comparison we shall use the same model as Batra and Hadar. The firm operates in its home country and in the foreign country. In addition to production, the firm can ship its product from one country to another by means of intrafirm transfer. The gross profits in each country are

01 Jan 1982
TL;DR: In this paper, a specific proposal for a deregulated power system based on a real-time spot energy marketplace is presented and analyzed, where a central TandD utility acts as a market maker, setting prices to equilibrate supply and demand.
Abstract: Many functions must be performed in any large electric power system. A specific proposal for a deregulated power system, based on a real-time spot energy marketplace, is presented and analyzed. A central TandD utility acts as a market maker, setting prices to equilibrate supply and demand. Decentralized competitive firms invest and operate in response to current and projected spot prices. The paper explicitly addresses the many practical engineering and economic functions and issues which must be taken into account by any proposal to deregulate electric power generation. It does not answer the question of whether deregulation is a good idea.

Posted Content
TL;DR: In this paper, a joint model of the autoregressions and exchange rate forecasting equation is proposed for the L UK/$US and DM/$US exchange rates from the recent floating rate period.
Abstract: Many models of exchange rate determination imply that movements in money supplies and demands should result in movements in exchange rates. Hence, if rational agents are attempting to forecast exchange rate movements, they should in the first instance forecast movements in the supplies of and demands for money balances. Furthermore, if these underlying variables follow some stable autoregressive processes agents should use those processes to make their forecasts. If we identify the forward rate with the market's expectation for the future spot rate, rationality of expectations will imply testable cross-equation restrictions in a joint model of the autoregressions and exchange rate forecasting equation. This strategy is implemented in the paper using data on the L UK/$US and DM/$US exchange rates from the recent floating rate period.