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Spot contract

About: Spot contract is a research topic. Over the lifetime, 3437 publications have been published within this topic receiving 91599 citations.


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Journal ArticleDOI
TL;DR: The effects of providing a spot market with dynamic prices and forward contracts to hedge against future revenue uncertainty are examined and indicates that spot markets alone can enhance revenues to Amazon, but this comes at the cost of increased risks due to the increased market share in the spot markets.
Abstract: Online storage service providers grant a way for companies to avoid spending resources on maintaining their own in-house storage infrastructure and thereby allowing them to focus on their core business activities. These providers, however, follow a fixed, posted pricing strategy that charges the same price in each time period and thus bear all the risk arising out of demand uncertainties faced by their client companies. We examine the effects of providing a spot market with dynamic prices and forward contracts to hedge against future revenue uncertainty. We derive revenue-maximizing spot and forward prices for a single seller facing a known set of buyers. We perform a simulation study using publicly available traffic data regarding Amazon S3 clients from Alexa.com to validate our analytical results. Our field study supports our analysis and indicates that spot markets alone can enhance revenues to Amazon, but this comes at the cost of increased risks due to the increased market share in the spot markets. Furthermore, adding a forward contract feature to the spot markets can reduce risks while still providing the benefits of enhanced revenues. Although the buyers incur an increase in costs in the spot market, adding a forward contract does not cause any additional cost increase while transferring the risk to the buyers. Thus, storage grid providers can greatly benefit by applying a forward contract alongside the spot market.

29 citations

Journal ArticleDOI
TL;DR: In this paper, the authors provide a theoretical investigation of equilibrium spot and futures price behavior in a non-renewable commodity market, where the reserve level of the commodity is expected to decline over time in the absence of successful discoveries of additional reserves.
Abstract: The purpose of this paper is to provide a theoretical investigation of equilibrium spot and futures price behavior in a nonrenewable commodity market. The underlying commodity is nonrenewable in the sense that the reserve level of the commodity is expected to decline over time in the absence of successful discoveries of additional reserves. I wish to understand how the nonrenewable nature of the commodity influences the intertemporal extraction of the commodity, equilibrium spot price behavior, and the prices of derivative assets traded on the nonrenewable commodity. There is considerable disagreement among economists whether resources are exhaustible in the sense of resource constraints becoming binding on our society in the foreseeable future. Some economists have argued that natural resources are being depleted at

29 citations

Journal ArticleDOI
Janusz Bialek1
01 Sep 1997
TL;DR: In this paper, a novel method of pricing is proposed which does not alter the optimal prices faced by the generators but makes the price faced by loads equal to the weighted average of the nodal optimal prices with the weights equal to power notionally supplied to a given load from individual generators.
Abstract: The paper analyses problems associated with the merchandise surplus (i.e. the difference between payments and revenues that is inherent to the spot pricing for electricity). A novel method of pricing is proposed which does not alter the optimal prices faced by the generators but makes the price faced by the loads equal to the weighted average of the nodal optimal prices with the weights equal to power notionally supplied to a given load from individual generators. This averaging, which is based on a recently proposed electricity tracing method, eliminates the merchandise surplus and most of the problems associated with it. The paper also suggests a hedging mechanism which not only separates financial performance of the generators and the loads from the actual operation but also places a financial incentive for the independent system operator to operate the system in such a way as to minimise the cost of transmission. Application of the method has been illustrated using a sample 10-node CIGRE network.

29 citations

Journal ArticleDOI
TL;DR: In this paper, market efficiency for the Iberian Power Futures Market and other European Power Markets, as well as other fuel markets through evaluation of ex-post Forward Risk Premium is analyzed.

29 citations

Journal ArticleDOI
TL;DR: In this paper, the authors present a simple model which explains convenience yields in line with Keynes' 'liquid stocks' theory and show that the yield on stored commodities has the payoff structure of a call option.
Abstract: In this paper we present a simple model which explains convenience yields in line with Keynes' 'liquid stocks' theory. When the flows of demand and production of a commodity are not synchronised, stored inventories are the source of supply which absorbs demand fluctuations in periods between production times. Since negative storage is not possible, the likelihood of a stockout implies that spot price may rise above futures price between production times. We show that the yield on stored commodities has the payoff structure of a call option. Furthermore, the existence of this call option acts to counter the appearance of normal backwardation in futures prices. Empirical tests on four commodities offer supportive evidence of our theory. Copyright 1997 by Oxford University Press.

29 citations


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Performance
Metrics
No. of papers in the topic in previous years
YearPapers
20241
202376
2022205
2021111
2020115
2019106