This paper analyzes the relation between commodity spot, forward prices, and convenience yield under incomplete markets. We model a maximization profit model of a firm that uses input commodities in order to produce output commodities while storing spot commodities and trading forward to hedge...

This paper studies commodity spot, forward, and futures prices under a continuous-time setting. Our model considers a representative firm, which uses an input commodity to produce an output commodity, stores the commodity, and trades forward or futures commodities to hedge. Through the...

Previous literature on price discovery in commodity markets is mainly focused on the question of whether the spot or the futures market dominates the price discovery process. Little attention, however, has been paid to the question of how the price discovery process is affected by futures...

This study analyzes the relationships of commodity spot and futures prices with convenience yield. Convenience yield is received by the owner of a spot commodity but not by the owner of the right to the commodity (e.g., futures). This is the first study to explicitly model commodity spot and...