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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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TL;DR: In this paper, the authors build an equilibrium model with commodity producers who are averse to future cash flow variability, and hedge using futures, where their hedging demand is met by risk-constrained speculators.
Abstract: We build an equilibrium model with commodity producers who are averse to future cash flow variability, and hedge using futures. Their hedging demand is met by risk-constrained speculators. Increases in producers' hedging demand (speculators' risk- capacity) increase hedging costs via price-pressure on futures, reducing producers' inventory holdings, and thus spot prices. Consistent with our model, in oil and gas data from 1980-2006 producers' default risk forecasts hedging demand, futures risk-premia and spot prices; more so when speculative activity is lower. We conclude that limits to financial arbitrage can generate limits to hedging by firms, affecting prices in both asset and goods markets.
53 citations
TL;DR: Xiong et al. as mentioned in this paper developed an equilibrium model with producers, retailers, and traders to study and quantify the impact of forward markets and vertical integration on prices, risk premia, and retail market shares.
Abstract: This paper analyzes the interactions between competitive (wholesale) spot, retail, and forward markets and vertical integration in electricity markets. We develop an equilibrium model with producers, retailers, and traders to study and quantify the impact of forward markets and vertical integration on prices, risk premia, and retail market shares. We point out that forward hedging and vertical integration are two separate mechanisms for demand and spot price risk diversification that both reduce the retail price and increase retail market shares. We show that they differ in their impact on prices and firms' utility because of the asymmetry between production and retail segments. Vertical integration restores the symmetry between producers' and retailers' exposure to demand risk, whereas linear forward contracts do not. Vertical integration is superior to forward hedging when retailers are highly risk averse. We illustrate our analysis with data from the French electricity market.
This paper was accepted by Wei Xiong, finance.
53 citations
Posted Content•
TL;DR: The authors identified price leadership patterns in foreign exchange trading, with a focus on central bank intervention as an informational trigger for leadership positioning, and applied Granger causality tests applied to DM/US$ spot rate quotes reveal Deutsche Bank as a price leader up to 60 minutes prior to Bundesbank interventionary reports.
Abstract: This paper identifies price leadership patterns in foreign exchange trading, with a focus on central bank intervention as an informational trigger for leadership positioning. Granger causality tests applied to DM/US$ spot rate quotes reveal Deutsche Bank as a price leader up to 60 minutes prior to Bundesbank interventionary reports. By the minus 25-minute mark, interbank quote adjustments become two-way Granger-causal. These results suggest that central bank activity is revealed in stages: first to the price leader, then to competitors and lastly to the general public.
53 citations
DOI•
01 May 2010
TL;DR: In this article, the authors measured the low frequency volatility of food commodity spot prices using the spline-GARCH approach and found that low-frequency volatility is positively correlated across different commodities, suggesting an important role for common factors.
Abstract: The macroeconomic effects of large food price swings can be broad and far-reaching, including the balance of payments of importers and exporters, budgets, inflation, and poverty. For market participants and policymakers, managing low frequency volatility—i.e., the component of volatility that persists for longer than one harvest year—may be more challenging as uncertainty regarding its persistence is likely to be higher. This paper measures the low frequency volatility of food commodity spot prices using the spline- GARCH approach. It finds that low frequency volatility is positively correlated across different commodities, suggesting an important role for common factors. It also identifies a number of determinants of low frequency volatility, two of which—the variation in U.S. inflation and the U.S. dollar exchange rate—explain a relatively large part of the rise in volatility since the mid-1990s.
53 citations
20 Jul 2008
TL;DR: The results show that the suggested method of SVC placement is effective in reducing the real and reactive power spot prices, generation cost, system real power loss, total wheeling charges, and enhancing the system loading margin during normal as well as critical contingency cases.
Abstract: Summary form only given. In this paper, a new reactive power spot price index (QSPI) has been suggested to determine the optimal location of static VAr compensator (SVC) in the power system. The proposed index has been computed at each bus based on the reactive power spot price under different loading conditions for the system intact and critical line outage contingency cases. The effectiveness of the proposed method has been tested on two practical Indian systems. The results show that the suggested method of SVC placement is effective in reducing the real and reactive power spot prices, generation cost, system real power loss, total wheeling charges, and enhancing the system loading margin during normal as well as critical contingency cases.
53 citations