Spot contract

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

Efficiency tests of futures markets for uk agricultural commodities

Abstract: An efficient futures market should provide a forecast of the future spot price which reflects all publicly available information; ideally, for effective price discovery such forecasts would also be unbiased. Evidence for market efficiency, much of which is US based, is mixed and despite its importance from both public and private perspectives, there are relatively few studies of futures market efficiency in relation to UK agricultural commodities. This paper presents the results of a study of market efficiency in relation to three distinct UK futures markets using a cointegration methodology. The results provide evidence of efficiency and unbiasedness in relation to wheat, some concerns with respect to efficiency in relation to potatoes and pigmeat and some concerns about bias in relation to potatoes.

A Two-Factor Model for Commodity Prices and Futures Valuation

Abstract: This paper develops a new reduced form two-factor model for commodity spot prices and futures valuation. This models extends Schwartz's (1997) two-factor model by adding two new features. First we replace the Ornstein-Uhlenbeck process for the convenience yield by a Cox-Ingersoll-Ross (CIR) process. This ensures that our model is arbitrage free while Schwartz's model does not rule out arbitrage possibilities. Second, we introduce a time-varying volatility for the spot price process. In particular, we consider the spot price volatility is proportional to the square root of the convenience yield level. This implicitly implies that the spot price volatility depends on inventory levels of the commodity as predicted by the theory of storage. We empirically test both models using weekly crude oil futures data from 5th of March 1999 to the 15th of October 2003. In both cases, we estimate the model's parameters using the Kalman filter.

Risk averse supply portfolio selection with supply, demand and spot market volatility

Abstract: Enterprise Risk Management (ERM) has become one of the most essential subjects in business management. This paper establishes how risk modeling can be applied to supply chain management, specifically to supply portfolio procurement decisions of a firm. In a single period setting, parts can be procured via traditional forward contracts, option contracts or spot purchases. Customer demand and spot prices are random and possibly correlated and firm׳s primary suppliers are subject to complete disruptions and yield uncertainties. This paper analyzes several scenarios where the spot market is not available, available for buying only, and available for both buying and selling. This article develops and solves mathematical models considering the risk neutral and risk averse (CVaR) objectives independently or simultaneously. For the special case of normally distributed random variables and a risk neutral objective, optimality properties were developed. A broad numerical study examines the sensitivity of procurement strategies to key problem parameters such as, risk attitude, demand and spot price volatilities, correlation between demand and spot prices and terms of option contracts.

CO2 Emission Allowances Trading in Europe - Specifying a New Class of Assets

Abstract: In the context of controlling greenhouse gas emissions, the directive on an EU-wide trading scheme for carbon dioxide (CO2) emission allowances may be considered as one of the major steps towards reducing environmental burden. A major question for market participants will be about regarding the price behavior of this new environmental asset. Due to non-maturity of the market, political regulations, fundamentals and certain characteristics of CO2 allowances it can be assumed that parameters for the price process or even the process itself changes through time. In this paper we review the stylized facts of emission allowances and come up with suggestions to model their price behavior adequately. We conduct a preliminary empirical analysis of CO2 allowance spot prices supporting our theoretical findings.