Based on the data samples using EUA spot and futures in the ICE and BLUENEXT exchange platform in the European Union emissions trading scheme (EU ETS), this paper propose the market behavior of convenience yields and examine the options feature of convenience yields for emission allowances. When the convenience yields of emission allowances are positive, the convenience yields are positively re...

This paper presents an application of the recently developed method for simultaneous dimension reduction and metastability analysis of high-dimensional time series in the context of computational finance. Further extensions are included to combine state-specific principal component analysis (PCA) and state-specific regressive trend models to handle the high-dimensional, nonstationary data. The ...

This paper offers an alternative to the conventional explanation of the 2007-08 food price crisis in terms of escalating demand or dwindling supply. Instead, its focus is on the legalinstitutional structure of commodity futures markets, which has witnessed a drastic alteration in the role of speculators. These have transformed from “market makers” (that keep commodity futures markets liquid by ...

We provide an explanation for the explosive growth in the popularity of Stock Index Futures contracts. In our economy there are three broad classes of traders that place orders with a competitive market maker that sets a bid-ask spread arising from adverse selection. Informed traders trade on the basis of their private information about the value of particular securities. Liquidity traders trad...

Energy commodities and their futures naturally show cointegrated price movements. However, there is empirical evidence that the prices of futures with different maturities might have, e.g., different jump behaviours in different market situations. Observing commodity futures over time, there is also evidence for different states of the underlying volatility of the futures. In this paper, we the...

In this study we investigate the statistical properties of wholesale electricity spot and futures prices traded on the New York Mercantile Exchange for delivery at the California-Oregon Border. Using daily data for the years 1998 and 1999, we find that many of the characteristics of the electricity market can be viewed to be broadly consistent with efficient markets. The futures risk premium fo...

In this paper we view the problem of adequate electricity supply and demand as a dynamic process affected by several fundamental factors. By incorporating the effect of the available price signals on investment decisions we model the investment dynamics for (i) a system comprising both spot and futures (forward) markets, and for (ii) a system comprising a spot and an installed capacity (ICAP) m...

Strengthening institutions in spot and derivative markets for commodities is a necessary ingredient of the liberalisation process in agriculture, and can impact upon the lives of millions. In this paper, we describe the existing market design prevalent on both the spot and the futures markets. We show some evidence on the role played by the nascent futures markets in price discovery. We documen...

Allaz and Vila (1993) show that oligopolistic industries may become more competitive if a futures market is added previous to the spot market. Later, Hughes and Kao (1997) show that this result occurs only if positions in the futures market are observed, and that without this condition the result is again the Cournot equilibrium. In this work we study different explicit formulations of observab...

Using a spillover index approach, we investigate volatility spillovers across China’s stock, bond, commodity futures, and foreign exchange (FX) markets and their evolution during the period 2005–2015. We find that these four financial markets are weakly integrated. The stock market is the largest net sender of volatility spillovers to other markets, followed by the bond market, and the FX and c...