We propose and test a theory of using commodities as collateral for financing. Under capital control and collateral constraint, investors import commodities and pledge them as collateral to earn higher expected returns. Higher collateral demands increase commodity prices and make the inventory...

In this paper, we examine the role that the Dalian Commodity Exchange (DCE) plays in the global price discovery of soybean futures. We employ Structural Vector Autoregressive (SVAR) and Vector Error Correction (VEC) models on the returns of the DCE and the Chicago Board of Trade (CBOT) soybean...

This paper studies the dynamic interaction between the net positions of traders and risk premiums in commodity futures markets. Short-term position changes are mainly driven by the liquidity demands of non-commercial traders, while long-term variation is primarily driven by the hedging demands...

This paper studies the dynamic interaction between the net positions of traders and risk premiums in commodity futures markets. Short-term position changes are mainly driven by the liquidity demands of non-commercial traders, while long-term variation is primarily driven by the hedging demands...

We introduce a new methodology to estimate the latent factors of a multivariate jump diffusion process illustrated with an application to the commodity futures term structure. Specifically, we propose a new state space form and then use a modified Kalman filter to estimate models with latent...

A new measure of hedging pressure in commodity options markets—commercial hedgers’ net short option exposure—predicts option returns and changes in the slope of implied volatility curves. Puts are more expensive, and calls are cheaper, when values of option hedging pressure are greater....

The commodity futures basis—the difference between the first and second futures prices—is known to forecast commodity futures returns, arguably through its relation with the convenience yield. We propose a refined measure of the basis, dubbed the relative basis, which is the difference...