Showing papers on "Spot contract published in 2016"
TL;DR: This paper analyzed how institutional investors entering commodity futures markets, referred to as the financialization of commodities, affect commodity prices and found that all commodity futures prices, volatilities, and correlations go up with financialization, but more so for index futures than for nonindex futures.
Abstract: We analyze how institutional investors entering commodity futures markets, referred to as the financialization of commodities, affect commodity prices. Institutional investors care about their performance relative to a commodity index. We find that all commodity futures prices, volatilities, and correlations go up with financialization, but more so for index futures than for nonindex futures. The equity-commodity correlations also increase. We demonstrate how financial markets transmit shocks not only to futures prices but also to commodity spot prices and inventories. Spot prices go up with financialization, and shocks to any index commodity spill over to all storable commodity prices.
341 citations
TL;DR: In this article, the explanatory power of a fundamental modeling approach explicitly accounting for must-run operations of combined heat and power plants (CHP) and intraday peculiarities such as a shortened intra-day supply stack is investigated.
111 citations
TL;DR: In this article, the authors use a portfolio of energy trade strategies to determine the value of arbitrage for pumped hydro and compressed air energy storage across European markets, and demonstrate that arbitrage opportunities exist in less integrated markets, characterized by significant reliance on energy imports and lower level of market competitiveness.
110 citations
TL;DR: In this article, the authors analyse the day-ahead spot price at the Dutch gas hub over the period 2011-2014 and conclude that the gas prices are predominantly determined by gas-market fundamentals.
73 citations
TL;DR: In this article, the authors discuss the equilibrium that results when private agents bank tradable emissions in the face of ongoing risk of future regulatory intervention and show that the cap will be achieved at unnecessarily high cost even if no regulatory intervention actually occurs.
67 citations
TL;DR: The authors examined the Fish Pool salmon futures contract with respect to how well the market performs in terms of the futures price being an unbiased estimator of the spot price and whether the market provides a price discovery function.
Abstract: This study examines the Fish Pool salmon futures contract with respect to how well the market performs in terms of the futures price being an unbiased estimator of the spot price and whether the market provides a price discovery function. Using data for 2006–2014 and with futures prices with maturities up to 6 months we find that spot and lagged futures prices are cointegrated and that the futures price provides an unbiased estimate of the spot price. We also find that, with the exception of the front month, that the causality is one-directional. The spot prices lead futures prices between 1–6 months maturity. Hence, while the spot and lagged futures prices are unbiased estimates, we do not find support for the hypothesis that futures prices provide a price discovery function. Rather, it seems that innovations in the spot price influence futures prices. This finding is not uncommon in new and immature futures contracts markets. Hence, the salmon futures market is still immature and has not yet rea...
62 citations
TL;DR: In this article, a novel electricity retail market model is presented in which elastic demands of consumers in a distribution network are traded at flexible selling prices offered by a retailer, and the main works are in three points: (1) Flexible and divided selling price settings over one day by the retailer, (2) flexible and elastic responses corresponding to the selling prices by different types of consumers, and (3) distribution network physical constraints to obtain the realistic cost of tariff for usage of the distribution network imposed to the retailer are formulated.
60 citations
TL;DR: The results show that the correlations between EUA carbon spot price and the equity markets are higher and more volatile in US and Europe than in China.
59 citations
TL;DR: In this paper, the authors extended existing literature on the assessment of electricity market integration in Europe, by developing and testing hypotheses on the convergence of electricity wholesale prices, and adopting a time-varying fractional cointegration analysis.
58 citations
TL;DR: In this paper, the dependence structure of electricity spot prices across regional markets in Australia was examined using different copula models including Archimedean, elliptical and copula mixture models.
57 citations
TL;DR: The decision to move to cost recovery and market prices, ending budgetary support, has not been implemented consistently across countries as discussed by the authors, and policy announcements have varied in the way they were communicated and the level of detail provided.
Abstract: The steep decline in the world oil price in the last quarter of 2014 slashed fuel price subsidies. Several governments responded by announcing that they would remove subsidies for one or more fuels and move to market-based pricing with full cost recovery. Other governments took advantage of low world prices to increase taxes and other charges on fuels. However, the decision to move to cost recovery and market prices, ending budgetary support, has not been implemented consistently across countries. Policy announcements have varied in the way they were communicated and the level of detail provided. When petroleum product prices bounced back during the first half of 2015, some "reforming" governments failed to raise prices correspondingly. Recent experience suggests that regular and frequent price adjustments, however small - as in Jordan and Morocco - help the government and consumers to get accustomed to fluctuations in world fuel prices and exchange rates. By contrast, freezing prices, even for a few months - for socioeconomic considerations or because the needed adjustments are small enough to be absorbed - increases the risk of reversion to ad hoc pricing and price subsidies. The more formally the decision to move to market-based pricing is communicated, the more public new price announcements, and the higher the frequency of price changes, the more likely the implementation of the announced pricing policy reform will be sustained.
TL;DR: In this paper, the authors investigated the role of speculation in the dynamics of primary commodity spot prices and found that excessive speculation leads to price volatility, and that bilateral relationships often exist between price volatility and speculation.
Abstract: The present study aims to investigate the dynamics of primary commodity spot prices and the role of speculation for the period 1995–2012. Using a linear and nonlinear Granger causality analysis, the relationship between speculation and GARCH conditional price volatility on the one side, and the linkage between excessive speculation and GARCH conditional price volatility on the other side, is carefully examined with the scope to establish whether volatility drives speculation or speculation drives price volatility, or whether there are no linkages between the two variables. The results show that excessive speculation leads conditional price volatility, and that bilateral relationships often exist between price volatility and speculation. In addition, the lead-lag relationships are not found for the entire sample period, but rather when small sub-periods are taken into account. It turns out, in fact, that excessive speculation has driven price volatility for maize, rice, soybeans, and wheat in parti...
TL;DR: Wang et al. as discussed by the authors proposed five typical contracts to coordinate decentralized reverse supply chains with strategic recycling behavior of consumers, and they compared the wholesale price contract with the subsidy contract and the cost-pooling contract respectively.
TL;DR: In this article, the authors develop a stylized model to investigate the impact of financial options on reducing carbon permit price volatility under a cap-and-trade system, and show that both the spot price level and the price volatility of carbon permits can be reduced via the trading of financial option, while achieving the emission reduction target.
TL;DR: In this paper, a wavelet cross-correlation analysis using a novel wavelet graphical tool was proposed to check the direction of the causality, applying non-linear causality tests to raw data and log returns as well as to the wavelet transform of the spot and futures prices.
Abstract: The West Texas Intermediate (WTI) spot price shows high volatility and in 2014 and 2015 when quoted prices declined sharply, long-term prices in future markets were less volatile. These prices are different and diverge depending on how they process fundamental and transitory factors. US tight oil production has been a major innovation with significant macroeconomic effects. In this paper we use WTI spot prices and long-term futures prices, the latter calculated as the expected value with a stochastic model calibrated with the futures quotes of each sample day. These long-term prices are the long-term equilibrium value under risk neutral measurement. In order to analyze potential time-scale relationships between spots and future, we perform a wavelet cross-correlation analysis using a novel wavelet graphical tool recently proposed. To check the direction of the causality, we apply non-linear causality tests to raw data and log returns as well as to the wavelet transform of the spot and futures prices. Our results show that in the spot and futures markets for the period 24 February 2006–2 April 2016 there is a bi-directional causality effect for most time scales (from intra-week to biannual). This suggests that spot and futures prices react simultaneously to new information.
TL;DR: In this paper, the authors analyse the short and long-term relationships between the world oil prices (Europe Brent Spot Price and West Texas Intermediate Spot Price) and the agricultural commodity prices (Wheat, Corn and Soybeans).
Abstract: Th e purpose of the study is to analyse the short and long-term relationships between the world oil prices (Europe Brent Spot Price and West Texas Intermediate Spot Price) and the agricultural commodity prices (Wheat, Corn and Soybeans). Th e analysis is based upon the data set covering the monthly period of 1990.01–2014.05. According to the Johansen co-integration tests results, there are no long-run relationships between each agricultural commodity prices and world oil prices at the 5% signifi cance level. On the other hand, according to the results of the Granger causality tests, there are uni-directional causality relationships from the Europe Brent and West Texas Intermediate oil prices to Wheat at the 1% and 5% signifi cance level respectively, to Corn at the 1% and 1% signifi cance level respectively and to Soybeans at the 1% and 5% signifi cance level respectively. No causality relationship from the agricultural commodity prices to world the oil prices has been observed.
TL;DR: In this article, the role of futures contracts on spot prices has been one of the key focus areas of research since the recent surge in commodity prices and increase in the volatility of commodity returns.
TL;DR: OptiSpot, a heuristic to automate application deployment decisions on cloud providers that offer the spot pricing model, is proposed and the performance of the heuristic method is compared to that of nonlinear programming and shown to markedly accelerate the finding of low-cost optimal solutions.
Abstract: The spot instance model is a virtual machine pricing scheme in which some resources of cloud providers are offered to the highest bidder. This leads to the formation of a spot price, whose fluctuations can determine customers to be overbid by other users and lose the virtual machine they rented. In this paper we propose OptiSpot, a heuristic to automate application deployment decisions on cloud providers that offer the spot pricing model. In particular, with our approach it is possible to determine: (i) which and how many resources to rent in order to run a cloud application, (ii) how to map the application components to the rented resources, and (iii) what spot price bids to use to minimize the total cost while maintaining an acceptable level of performance. To drive the decision making, our algorithm combines a multi-class queueing network model of the application with a Markov model that describes the stochastic evolution of the spot price and its influence on virtual machine reliability. We show, using a model developed for a real enterprise application and historical traces of the Amazon EC2 spot instance prices, that our heuristic finds low cost solutions that indeed guarantee the required levels of performance. The performance of our heuristic method is compared to that of nonlinear programming and shown to markedly accelerate the finding of low-cost optimal solutions.
TL;DR: A real options approach to evaluate the profitability of investing in a battery bank finds the real options value is higher than the NPV, confirming the value of flexible investment timing when both revenues and investment cost are uncertain.
Abstract: In this paper we develop a real options approach to evaluate the profitability of investing in a battery bank. The approach determines the optimal investment timing under conditions of uncertain future revenues and investment cost. It includes time arbitrage of the spot price and profits by providing ancillary services. Current studies of battery banks are limited, because they do not consider the uncertainty and the possibility of operating in both markets at the same time. We confirm previous research in the sense that when a battery bank participates in the spot market alone, the revenues are not sufficient to cover the initial investment cost. However, under the condition that the battery bank also can receive revenues from the balancing market, both the net present value (NPV) and the real options value are positive. The real options value is higher than the NPV, confirming the value of flexible investment timing when both revenues and investment cost are uncertain.
TL;DR: In this paper, the authors investigated associations between spot prices from the British, French and Nordpool markets with those in connected electricity markets and fuel input prices, from December 2005 to October 2013.
TL;DR: In this paper, the authors show that natural gas futures prices do not predict the magnitude of future natural gas spot prices any better than what would be predicted by a random walk model.
TL;DR: In this article, the impact of the futures-spot basis, seasonality, industry-specific variables, and demand uncertainty on the risk premium and spot price change of Atlantic salmon was analyzed.
TL;DR: In this paper, the extent of market integration in the physically interconnected regional markets was examined based on daily electricity spot prices. But the results from the pairwise unit root tests, cointegration analysis and a time varying coefficient model suggest that full market integration has not been achieved yet.
Abstract: The National Electricity Market was established in 1998 as a response to the
overall liberalization and restructuring of the Australian electricity sector. The
wholesale market integration effects of this establishment, however, remain to be
systematically examined. We use econometric techniques based on pairwise unit
root tests, cointegration analysis and a time varying coefficient model to study
the extent of market integration in the physically interconnected regional markets
based on daily electricity spot prices. The results from the pairwise unit root tests
provide mixed evidence of price convergence while cointegration analysis does
not reject the absence of persistent price differences across the physically interconnected regions. The results from the time-varying filtered coefficient model
suggest that full market integration has not been achieved yet. We empirically
show the presence of significant network losses and constraints across the interregional interconnectors in the NEM. Our findings suggest that convergence in
generation and network ownership, coupled with harmonisation of network regulation and regulatory institutional framework, will be increasingly important factors in improving wholesale market integration across all energy-only markets as
they experience an increase in the share of renewable energy.
TL;DR: In this article, the authors studied the problem of trading futures with transaction costs when the underlying spot price is mean-reverting and formulated and solved the corresponding optimal double stopping problems to determine the optimal trading strategies.
Abstract: This paper studies the problem of trading futures with transaction costs when the underlying spot price is mean-reverting. Specifically, we model the spot dynamics by the Ornstein–Uhlenbeck, Cox–Ingersoll–Ross, or exponential Ornstein–Uhlenbeck model. The futures term structure is derived and its connection to futures price dynamics is examined. For each futures contract, we describe the evolution of the roll yield, and compute explicitly the expected roll yield. For the futures trading problem, we incorporate the investor’s timing option to enter or exit the market, as well as a chooser option to long or short a futures upon entry. This leads us to formulate and solve the corresponding optimal double stopping problems to determine the optimal trading strategies. Numerical results are presented to illustrate the optimal entry and exit boundaries under different models. We find that the option to choose between a long or short position induces the investor to delay market entry, as compared to the case where the investor pre-commits to go either long or short.
TL;DR: Using a rational bubble framework, a future spot price bubble can be shown to induce explosive behavior in current long maturity futures prices under particular conditions as discussed by the authors, using a novel test of the unit root null against a mildly explosive alternative to investigate multiple bubbles in the crude oil spot and a range of futures prices along the yield curve.
TL;DR: In this paper, the interaction between a carbon price signal and wholesale electricity spot prices within the Australian National Electricity Market (NEM) was investigated by employing an empirical analysis using daily data from July 2010 to October 2013.
Abstract: This paper statistically investigates the interaction between a carbon price signal and wholesale electricity spot prices within the Australian National Electricity Market (NEM). While prior studies in Australia have been mainly conducted based on the theoretical and simulation methods, this paper examines the issue by employing an empirical analysis using daily data from July 2010 to October 2013. The findings reveal that carbon costs would indeed be fully passed on to wholesale electricity spot prices resulting in higher electricity prices for consumers and potential windfall profits for some generators.
TL;DR: This paper examined whether the gambling behavior of investors affects volume and volatility in financial markets and found that the ratio of call option volume relative to total option volume is greatest for stocks with return distributions that resemble lotteries.
Abstract: This study examines whether the gambling behavior of investors affects volume and volatility in financial markets. Focusing on the options market, we find that the ratio of call option volume relative to total option volume is greatest for stocks with return distributions that resemble lotteries. Consistent with the theoretical predictions of Stein (1987), we demonstrate that gambling-motivated trading in the options market influences future spot price volatility. These results not only identify a link between lottery preferences in the stock market and the options market, but they also suggest that lottery preferences can lead to destabilized stock prices.
TL;DR: In this article, the authors investigated the relationship between electricity spot prices and generation failures in the German-Austrian electricity market and found a positive impact of prices on non-usable marginal generation capacity for strategic failures only.
Abstract: In electricity day-ahead markets organized as uniform price auction, a small reduction in supply in times of high demand can cause substantial increases in price. We use a unique data set of failures of generation capacity in the German-Austrian electricity market to investigate the relationship between electricity spot prices and generation failures. Differentiating between strategic and non-strategic failures, we find a positive impact of prices on non-usable marginal generation capacity for strategic failures only. Our empirical analysis therefore provides evidence for the existence of strategic capacity withholding through failures suggesting further monitoring efforts by public authorities to effectively reduce the likelihood of such abuses of a dominant position.
TL;DR: In this paper, the authors analyzed the dynamic behavior of day-ahead spot prices in the German electricity spot market due to positive structural shocks in wind and solar power using a dynamic structural vector autoregressive model to estimate the related structural impulse response functions.
TL;DR: The authors empirically examines relationships and dynamics between the price of three crude oil benchmarks, namely the WTI, Brent, and Oman, and finds that a long run relationship exists between the pairs (WTI-Brent and WTI-Oman) of spatially separated spot markets.