Search Results for « Commodity Futures »

Abstract This paper investigates the information content of the futures option markets trading activities in determining commodity futures returns. Our findings suggest that position changes in the commodity futures option markets provide incremental predictive power for commodity futures returns in addition to the effects of commodity futures markets position changes. Particularly, for both commercial traders and noncommercial traders, options position changes impact the futures price in the same direction as futures position changes. Furthermore, the nonmomentum of position changes of options market contributes overwhelmingly relative to the idiosyncratic risk and hedging pressure in the case of noncommercial trading.

This paper adds to the well‐documented puzzle of the forward bias of exchange rates. While the exchange rate of a small commodity‐exporting economy, such as Australia, can be closely tied to commodity prices, this paper demonstrates empirically that a portfolio of commodity futures exhibits little, if any, bias. A microfounded small open economy model is developed in which the exchange rate depends on export commodity prices. This is used to demonstrate how systematic expectation errors about the monetary process could cause the bias in exchange rate forwards when there is an absence of bias in commodity futures.

Abstract The stochastic behavior of agricultural commodity prices is investigated using observations of the term structures of futures prices over time. The continuous time dynamics of (log‐) commodity prices are modeled as a sum of a deterministic seasonal component, a non‐stationary state‐variable, and a stationary state‐variable. Futures prices are established by standard no‐arbitrage arguments and the Kalman filter methodology is used to estimate the model parameters for corn futures, soybean futures, and wheat futures based on weekly data from the Chicago Board of Trade for the period 1972–1997. Furthermore, in a discussion of the estimated seasonal patterns in agricultural commodity prices, the paper provides empirical evidence on the theory of storage that predicts a negative relationship between stocks of inventory and convenience yields; in particular, convenience yields used in this analysis are extracted using the Kalman filter. © 2002 Wiley Periodicals, Inc. Jrl Fut Mark 22:393–426, 2002