The increasing inflow of institutional investors replicating broad based indices into commodity futures markets has been linked to excessive calendar spreads and anomalies in futures curves. At the same time, these investors have been welcomed as liquidity providers. This paper hypothesises that...

The agriculture sector observed the penetration of parametric weather risk financial products, including weather index insurance and weather derivatives, between the late 1990s and the early 2000s. However, the adoption of such products remains low. While the reasons for low adoption are...

Gone are the days when inflation fears had receded under years of 'Great Moderation' in macroeconomics. The US subprime financial crisis, the ensuing 'Great Recession' and the sovereign debt scares that spread throughout much of the industrialized world brought about a new order characterized by...

This paper takes an innovative look at the relationship between the pricing of commodity futures contracts and its relation to storage and speculation. Fifteen commodities are analyzed over the time period from 1990 to 2010. Contrary to other studies, we analyze temporary and permanent futures...

Headline inflation in most industrialized countries, the US in particular, has been shown to be mean reverting to core inflation in the medium term, whilst at the same time the pass-through of exogenous commodity price shocks from the headline to the core has dramatically gone down as a result...

The paper studies the return-volatility relationship in a range of commodities. We develop a commodity price model and show that the volatility of price changes can be positively or negatively related to demand shocks. An “inverse leverage effect” – the volatility is higher following...

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...

The paper develops a price discovery model for commodity futures markets that accounts for two forms of limits to arbitrage caused by transaction costs and noise trader risk. Four market regimes are identified: (1) effective arbitrage, (2) transaction costs but no noise trader risk, (3) no...

We propose a micro-founded equilibrium model to examine the interactions between the physical and the derivative markets of a commodity. This model provides a unifying framework for the hedging pressure and storage theories. The model shows a variety of behaviors at equilibrium that can be used...

We model the impact of supply and demand on risk premiums in electricity futures, using daily data for 2003-2014. The model provides a satisfactory fit and allows for unspanned economic risk not embedded in the futures price. The spot risk premium and forward bias implied by the model are on...