Spot contract

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

Treasury Management Model with Foreign Exchange Exposure

Abstract: In this paper we formulate a model for foreign exchange exposure management and (international) cash management taking into consideration random fluctuations of exchange rates. A vector error correction model (VECM) is used to predict the random behaviour of the forward as well as spot rates connecting dollar and sterling. A two-stage stochastic programming (TWOSP) decision model is formulated using these random parameter values. This model computes currency hedging strategies, which provide rolling decisions of how much forward contracts should be bought and how much should be liquidated. The model decisions are investigated through ex post simulation and backtesting in which value at risk (VaR) for alternative decisions are computed. The investigation (a) shows that there is a considerable improvement to "spot only" strategy, (b) provides insight into how these decisions are made and (c) also validates the performance of this model.

Debt, Futures and Options--Optimal Price-Linked Financial Contracts under Moral Hazard and Limited Liability

Abstract: This paper characterizes the optimal financial contract between a risk neutral entrepreneur and risk neutral lender/investors when the entrepreneur has limited liability, there is moral hazard, and the investor payoff function can depend on both output and output price but is nondecreasing in output. In this setting, the optimal contract is a price-contingent commodity bond that can be replicated by combining pure debt, commodity futures, and commodity call option contracts. Although a pure commodity bond contract is sometimes optimal, a pure debt contract is almost never optimal. Various properties of the entrepreneur's optimal price-contingent promised payment are described. Copyright 1993 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Modeling Co-Movement among Different Agricultural Commodity Markets: A Copula-GARCH Approach

Abstract: The aim of this research is to explore the volatility contagion among different agricultural commodity markets. For this purpose, this research make use of the copula-GARCH (Generalized Autoregressive Conditional Heteroskedasticity) model for the daily spot prices of six major agriculture grain commodities including corn, wheat, soybeans, soya oil, cotton, and oat over the period from 2000 to 2019. Our results provide evidence that significant contagion effects and risk transmissions exist among different agricultural grain commodity markets, suggesting that potential speculation effects on one agricultural market could be contagious for another agricultural market and result an increase in volatility in agricultural product markets. Second, agricultural commodities appears to co-move symmetrically. We also find substantial extreme co-movements among agricultural commodity markets. This indicates that agricultural commodity markets tend to crash (boom) together during extreme events. Moreover, after the food crisis, contagion effects and risk transmissions among different agricultural commodity markets increased substantially. Fourth, we find that the strongest contagion effects and risk transmissions are between corn and soybeans, and the weakest contagion effects and risk transmissions are between soya oil cotton and between cotton and oat. Last, we document that the co-movement varies over time. Our findings hold important implications for modeling the co-movement by the copula-GARCH approach.