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Boston MA (SPX) Mar 12, 2024 To help curb climate change, the United States is working to reduce carbon emissions from all sectors of the energy economy. Much of the [...]

Byline: Bruce Schultz 1 The Rice Leadership Development Program toured the LSU AgCenter H. Rouse Caffey Rice Research Station at Crowley, La., and visited a crawfish farming operation on March [...]

Analyst forecasts and the contribution of analysts to price discovery in the natural gas storage market are studied. The market appears to condition expectations regarding weekly storage releases based on analyst forecasts. It also places differential emphasis on the individual forecasts of analysts according to their prior accuracy, placing a greater emphasis on long-term accuracy.

The effects of large trades executed by outside customers on the prices of futures contracts on the Chicago Mercantile Exchange are examined. Large buyer-initiated trades have a larger permanent price impact than large seller-initiated trades.

The martingale hypothesis for future prices is tested on the assumption that futures returns depend on a linear combination of predictors. The predictors are collapsed into a single-index variable. Four agricultural commodity futures are found to contain significant information about the expected futures returns.

A class of new copula-based generalized autoregressive conditional heteroskedasticity (GARCH) models for estimating optimal hedge ratio is proposed. The models' effectiveness are compared with those of other hedging models. The GARCH models are seen to perform more effectively than other dynamic hedging models.

Energy futures trading activity in the United States is seen as excessive. Daily trading volumes for natural gas futures exceed daily physical usage by 12 to 30 times. But analysis reveals that futures trading volumes account for only a fraction of physical usage.

The long-run relationship between spot and futures prices is studied using the cost of carry model and is used to forecast out of sample oil spot and futures price movements. The information in the futures market can explain in-sample oil price movements, but a vector error correction model outperforms the random walk model in forecasting out-of-sample oil price movements.

Energy futures are among the most actively traded futures contracts. This underscores the importance of energy products as raw inputs in the economy and, hence, the significance of energy derivatives [...]

The Nordic Power Exchange (Nord Pool), the first multinational exchange for electricity trading, has existed since January 1996. Spot and futures contracts are traded on this exchange and its typical [...]

Analysis of the futures spread risk involved in soybean multiyear hedge-to-arrive (HTA) contracts provides a quantitative description of the monetary risks that arise from such contracts. This study examined the old crop-new crop futures price spreads from 1948 to 1997 and related monetary risks that go with making the transition from old crop to new crop futures contracts. Findings revealed that the chance of having a negative old crop-new crop spread is about 75% for all the years covered although a 100% probability was found for the high-price years. Therefore, a multiyear HTA is not a reliable hedge.

Volatility in the US and Japanese gold futures markets, COMEX and TOCOM, is analyzed and compared using data from prices of futures contracts and monthly trading volumes from the period of July 1987 to May 1992. Results reveal intraday variance for gold futures contracts to be significantly higher in the COMEX than in the TOCOM. It is also noted, contrary to earlier studies such as Amihud and Mendelson (1987) and Stoll and Whaley (1990), that the TOCOM non-trading period volatility is greater than the trading

Linear and non-linear dependence are examined in three petroleum futures returns. Both dependence exist in the three energy futures. The proof against market efficiency, provided by linear dependence tests, is not reflected by the data when the nonlinear dependence data are considered. A GARCH(1,1) model also provides evidence for the martingale hypothesis. The null hypothesis that the lagged and constant terms are jointly zero is not rejected.

The effect of daily price limits on commodity futures trading was studied using a market-making model. It was shown that traders behave differently during periods wherein price limits are set. The results indicated that traders hold their market positions during days when price limits have been reached. The findings suggest that futures market traders do not anticipate price movements and merely adjust their bids and offers in reaction to the present order flow.

A new model for estimating the minimum-variance hedge ratios for storable commodities has been developed. Unlike previous models, the new approach asserts that hedge regressions should be conditional based on the available information during the placement of the hedge. It also asserts that such information should be included in a specific information set. Moreover, the model has provisions for testing whether the size of the hedge ratio estimate is dependent on the expected profitability of storage.

Some of the numerical procedures for valuing options include Monte Carlo simulation, lattice procedures and finite difference methods. Tian (1993) has examined the numerical efficiency of lattice models. His alternative binomial model had greater numerical efficiency than the Cox, Ross and Rubenstein (1979)(CRR) model with respect to call and American put options. The CRR model, on the other hand, had greater efficiency than his alternative model with respect to European put options. It is shown that Tian's model is not more numerically efficient than the Cos, Ross and Rubenstein paradigm.