publication . Preprint . 2011

Hedging vs. speculative pressures on commodity futures returns

Cifarelli, Giulio; Paladino, Giovanna;
Open Access
  • Published: 10 Jan 2011
Abstract
This study introduces a non linear model for commodity futures prices which accounts for pressures due to hedging and speculative activities. The linkage with the corresponding spot market is considered assuming that a long term equilibrium relationship holds between futures and spot pricing. Over the 1990-2010 time period, a dynamic interaction between spot and futures returns in five commodity markets (copper, cotton, oil, silver, and soybeans) is empirically validated. An error correction relationship for the cash returns and a non linear parameterization of the corresponding futures returns are combined with a bivariate CCC-GARCH representation of the condit...
Subjects
free text keywords: Commodity spot and futures markets; dynamic hedging; speculation; non linear GARCH; Markov regime switching, jel:G15, jel:Q47, jel:G13

Lien, D. and Y.K. Tse. “Hedging Downside Risk with Future Contracts”. Applied Financial Economics 10 (2000):163-170.

Powered by OpenAIRE Research Graph
Any information missing or wrong?Report an Issue