This 2-part series discusses the emergence of financial derivatives after the collapse of the Bretton Woods accord in 1971. In Part 1, the article explains the concepts that enabled financial derivatives markets to flourish, focusing on the required mathematical concepts. Part 2 continues with...

This paper provides an introduction to U.S. commodity futures markets, which is especially relevant for individuals in developing markets who are newly embracing market solutions to financial uncertainty. The paper specifically covers the following topics: (1) the beginning, transformation, and...

A number of empirical studies, mainly from academic researchers, have been crucial in the debate on the economic role of futures trading. This article briefly reviews these influential studies with a focus on agricultural futures contracts, financial futures contracts. and the transparency of data

This article revisits a number of empirical relationships in the oil and commodity index futures markets. For example, the article examines how to put roll yields in proper perspective, which is that they are most properly seen as predictive of future returns over sufficiently long timeframes....

In the Fall of 2011, futures market participants were caught off-guard when MF Global filed for bankruptcy. Essentially, this episode educated industry participants that customer protections in the U.S. commodity futures markets had been more ambiguous than expected. That said, there are a...

This article covers the trading blowups at the hedge fund, Amaranth, and at the Futures Commission Merchant, MF Global. Although the lessons from the Amaranth blowup can best be understood in terms of market-risk principles, the lessons from the MF Global bankruptcy are best understood in terms...

Given the generally observed mean-reverting nature of spot commodity prices, it should naturally follow that across time, roll yields (and therefore, backwardation) have to be the dominant explanatory variable for individual futures contract returns over long enough time horizons. In this paper,...

Broadly speaking, there are seven strands of literature on commodity pricing theory, which we summarize as follows: The insurance role of commodity futures contracts, which emphasizes the role of the speculator; the theory of storage, which emphasizes the behavior of the inventory holder and...

Managed futures strategies are a niche-within-a-niche in the capital markets. Despite this status, managed futures have become of particular interest to hedge fund investors. This paper will discuss why this has become the case by focusing on this strategy's unique diversification properties. We...

On June 25th, 2007, the U.S. Senate Permanent Subcommittee on Investigations released a report on the Amaranth debacle, entitled, “Excessive Speculation in the Natural Gas Market.” The report was released in conjunction with the subcommittee's public hearing on the same date. The 135-page...