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A partial equilibrium for the convenience yield risk premium

Authors :
Attaoui, Sami
Lacoste, Vincent
Six, Pierre
Palmer, Sandrine
Pôle Finance Responsable - Rouen Business School
Rouen Business School
Source :
ESE Energy and Finance Conference, ESE Energy and Finance Conference, Oct 2011, Rotterdam, Netherlands, 50th Annual Meeting of the Southwestern Finance Association (SWFA), 50th Annual Meeting of the Southwestern Finance Association (SWFA), Mar 2011, Houston, United States
Publication Year :
2011
Publisher :
HAL CCSD, 2011.

Abstract

International audience; This papers develops a partial equilibrium model of the convenience yield risk premium. Contrary to the previous literature, the risk premium is computed explicitely and endogenously. We provide a decomposition of the convenience yield risk premium in terms of the volatility of the convenience yield as well as in terms of the sensitivity of the marginal utility of investors to the movements of the convenience yield. This decomposition enables us to assess the impact of the risk aversion and investment horizon of investors on the futures contracts' basis and on the term structure of volatility for our illustration carried out in the case of the copper market.

Details

Language :
English
Database :
OpenAIRE
Journal :
ESE Energy and Finance Conference, ESE Energy and Finance Conference, Oct 2011, Rotterdam, Netherlands, 50th Annual Meeting of the Southwestern Finance Association (SWFA), 50th Annual Meeting of the Southwestern Finance Association (SWFA), Mar 2011, Houston, United States
Accession number :
edsair.dedup.wf.001..67e73bab4051ba9177f6820f450aa148