Volatility and Depth in Commodity and FX Futures Markets

Comparative Nonlinear Modeling of FX Futures Options Volatility in Heterogeneous Markets

Optimal portfolios in commodity futures markets

We consider portfolio optimization in futures markets. We model the entire futures price curve at once as a solution of a stochastic partial differential equation. The agents objective is to maximize her utility from the final wealth when investing in futures contracts. We study a class of futures price curve models which admit a finite-dimensional realization. Using this, we recast the portfol...

Bid - Ask Spreads in Commodity Futures Markets

Issues of recent interest and controversy regarding bid-ask spreads in commodity futures markets are investigated. First we apply competing spread estimators to open outcry transactions data and compare resulting estimates to observed spreads. This enables market microstructure researchers, regulators, exchange officials, and traders the opportunity to evaluate the usefulness and accuracy of bi...

Hedging in Chinese Commodity Futures Markets

Chinese commodity futures markets have become some of the most important derivative markets worldwide. This paper studies the optimal hedge ratios on two popular contracts in China, soybeans and copper, by employing copula functions. Our empirical results suggest that the proposed copula hedging strategy outperforms the simple regression method and dynamic conditional correlation (DCC) method b...

Determinants of Hedging and Risk Premia in Commodity Futures Markets

This paper examines the determinants of commodity futures hedging and of risk premia arising from covariation of the futures price with stock market returns, and with the reve? nues of producers. Owing to supply shocks that stochastically redistribute real wealth (surplus) between producers and consumers, and to limited participation in the futures market, the total risk premium in the model is...