A simple equilibrium model for a commodity market with spot trades and futures contracts
Résumé
We propose a simple equilibrium model, where the physical and the derivative
markets of the commodity interact. There are three types of agents: industrial pro-
cessors, inventory holders and speculators. Only the two first of them operate in the
physical market. All of them, however, may initiate a position in the paper market,
for hedging and/or speculation purposes. We give the necessary and sufficient con-
ditions on the fundamentals of this economy for a rational expectations equilibrium
to exist and we show that it is unique. This is the first contribution of the paper.
Our model exhibits a surprising variety of behaviours at equilibrium, and our second
contribution is that the paper offers a unique generalized framework for the analysis
of price relationships. The model indeed allows for the generalization of hedging
pressure theory, and it shows how this theory is connected to the storage theory.
Meanwhile, it allows to study simultaneously the two main economic functions of
derivative markets: hedging and price discovery. In its third contribution, through
the distinction between the utility of speculation and that of hedging, the model
illustrates the interest of a derivatives market in terms of the welfare of the agents.
Origine : Fichiers produits par l'(les) auteur(s)
Loading...