Spot contract

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

Losing Under Contract: Transaction-Cost Externalities and Spot Market Disintegration

Abstract: Standard economic intuition of revealed preference implies that when two parties freely enter into a contract then neither should be worse off. In this study, we develop a simple model showing that introducing the opportunity to contract can lower welfare for some, and perhaps all, contracting parties. We consider a situation where processors can obtain inputs from suppliers (farmers) using either a spot market or contractual arrangements, and where spot market transaction costs depends on the volume of trade in the spot market. We show that contracting parties may lose when more contracting results in higher transaction costs for spot market participants. At the margin, firms and input suppliers gain from signing contracts. However, contracting raises spot-market transaction costs for those who do not sign contracts, which provides a greater incentive for others to sign contracts, ultimately inducing more contracting than optimal. The model demonstrates why structural or organizational change may be rapid and why the private minimization of transaction costs may not lead to optimal institutional arrangements.

Can spot and contract markets co-exist in agriculture?

Abstract: New production technologies, consumers who are more discriminating, and the need for improved coordination are among the forces driving the move from spot markets to contracts. Some worry that this tendency will result in the disappearance of spot markets, or at least that they will become too thin to be of help for an efficient price discovery process. Other authors point to the reduction in welfare of independent producers resulting from contracting in oligopsonistic industries. While a large body of literature is available tackling the contract versus spot market decision, much less is known about the reasons that lead to procurement in both markets. This paper provides a simple model to study how fundamental economic factors influence the contracting behavior of farmers and processors. In the model, processors contract upstream with price-taking farmers. Participation in both markets arises as a Nash equilibrium for a wide range of parameterizations. Numerical methods are used to examine the effects of fundamental economic factors on the relative size of the spot and contract markets.

Enhanced premium equity participating securities

Abstract: A financial unit is disclosed According to one embodiment the unit includes a fixed income security and a forward purchase contract The fixed income security may include a maturity date, a principal amount and an interest amount The forward purchase contract may obligate a holder of the forward purchase contract to purchase a quantity of equity securities of an issuer of the unit for a price equal to the stated amount of the unit no later than a settlement date specified in the forward purchase contract In addition, the forward purchase contract may further obligate the issuer of the unit to pay a purchaser of the unit a forward purchase contract payment at issuance of the unit and possibly additional forward contract payments after issuance

Precious Metals under the Microscope: A High-Frequency Analysis

Abstract: Taking advantage of a trades-and-quotes high-frequency database, we document the main stylized facts and dynamic properties of spot precious metals, i.e. gold, silver, palladium, and platinum. We analyze the behaviors of spot prices, returns, volume, and selected liquidity measures. We find clear evidence of periodic patterns matching the trading hours of the most active markets round-the-clock. The time series of spot returns have thus properties similar to those of traditional financial assets with fat tails, asymmetry, periodic behaviors in the conditional variances, and volatility clustering. The gold (platinum) is the most (least) liquid and less (most) volatile asset. Commonality in liquidities of precious metals is very strong.