Do Changes in Natural Gas Futures Prices Influence Changes in Natural Gas Spot Prices?

1993 ◽  
Vol 11 (5) ◽  
pp. 467-472 ◽  
Author(s):  
John H. Herbert
Keyword(s):  
Natural Gas ◽  
Futures Markets ◽  
Spot Market ◽  
Spot Markets ◽  
Futures Prices ◽  
Market Prices ◽  
Spot Prices ◽  
Futures Contract

Data on natural gas futures and spot markets are examined to determine if variability in price on futures markets influences variability in price on spot markets. Using econometric techniques, it is found that changes in futures contract prices do not precede changes in spot market prices.

scholarly journals Relationship of Causality Between Spot And Futures Markets of Borsa Istanbul Index 30 and Dow Jones Industrial Average

2019 ◽  
Author(s):  
Letife Özdemir ◽  
Ercan Özen ◽  
Simon Grima
Keyword(s):  
Futures Markets ◽  
Price Discovery ◽  
Emerging Market ◽  
Spot Market ◽  
Spot Markets ◽  
Regression Equations ◽  
International Level ◽  
Causality Test ◽  
Futures Contract ◽  
Causality Relationship

Futures markets are mainly used as a tool for price discovery and for risk management on the spot markets and enable diversification for international portfolio investments. With this study we aim (1) to investigate the causality relationship between futures markets and spot market and (2) to examine the causality relationship between futures markets and spot markets in different countries. We are interested in both the futures markets - spot market relations and the interactions between the markets at international level. For variables we used the the BIST30 spot index and BIST30 futures contract representing the Borsa Istanbul market and the Dow-Jones 30 index and Dow-Jones 30 futures contract, which are the most important indices representing the US markets. Daily closing price data for the period between 2nd January, 2009 and 18th June, 2018 were analyzed using correlation, unit root test, causality test and regression equations. The results of the study show that the futures markets continue their price discovery role for both the spot markets and futures markets and are influential on other futures and spot markets at international level. These findings are important for investors wanting to invest in Turkey and in similarly considered emerging market economies. It will help investors take informed decisions by providing them with a more efficient price estimations utilizing the futures markets.

scholarly journals Examination of the Spillover Effects among Natural Gas and Wholesale Electricity Markets Using Their Futures with Different Maturities and Spot Prices

Energies ◽  
2020 ◽  
Vol 13 (7) ◽  
pp. 1533
Author(s):  
Tadahiro Nakajima ◽  
Yuki Toyoshima
Keyword(s):  
Natural Gas ◽  
Electricity Markets ◽  
Futures Markets ◽  
Spillover Effects ◽  
Futures Market ◽  
Spot Markets ◽  
Electricity Prices ◽  
Spot Prices ◽  
Natural Gas Prices ◽  
Gas Price

This study measures the connectedness of natural gas and electricity spot returns to their futures returns with different maturities. We employ the Henry Hub and the Pennsylvania, New Jersey, and Maryland (PJM) Western Hub Peak as the natural gas price indicator and the wholesale electricity price indicator, respectively. We also use each commodity’s spot prices and 12 types of futures prices with one to twelve months maturities and realize results in fourfold. First, we observe mutual spillover effects between natural gas futures returns and learn that the natural gas futures market is integrated. Second, we observe the spillover effects from natural gas futures returns to natural gas spot returns (however, the same is not evident for natural gas spot returns to natural gas futures returns). We find that futures markets have better natural gas price discovery capabilities than spot markets. Third, we observe the spillover effects from natural gas spot returns to electricity spot returns, and the spillover effects from natural gas futures returns to electricity futures returns. We learn that the marginal cost of power generation (natural gas prices) is passed through to electricity prices. Finally, we do not observe any spillover effects amongst electricity futures returns, except for some combinations, and learn that the electricity futures market is not integrated.

scholarly journals The interdependence of coffee futures and spot markets - An econometric analysis

2021 ◽  
pp. 56-66
Author(s):  
B.N. Pradeepa Babu ◽  
Arun Muniyappa
Keyword(s):  
New York ◽  
Futures Markets ◽  
Spot Markets ◽  
Futures Prices ◽  
Spot Prices ◽  
Robusta Coffee ◽  
Indian Context ◽  
Long Run ◽  
Short Run ◽  
Producer Prices

Coffee is an export-oriented commodity for producing countries, and it is actively traded at international commodity exchange platforms viz., Intercontinental Exchange (ICE), New York and ICE, Europe. This study examines the interdependence of futures and spot markets for coffee in the price discovery mechanism, particularly in the Indian context. The study has considered both the International Coffee Organization (ICO) indicator prices and producers’ prices in India’s spot prices. The study confirms the existence of a stable long-run relationship between ICE coffee futures and ICO spot prices, implying that both prices react to the same set of market information. While there is an indication of equilibrium or long-run relationship between ICE Coffee futures (New York) and Arabica producer prices (at farm gate level) in India, the same was not true for Robusta coffee. The absence of co-integration between ICE futures prices (London) and Robusta producer prices in India suggested only a short-run relationship between them. The findings of the study conclude with strong evidence that the farm gate prices in India have been caused by the ICE futures markets, declining the contrary.

Can futures markets accommodate Indian farmers?

2016 ◽  
Vol 6 (2) ◽  
pp. 150-172 ◽  
Author(s):  
Kushankur Dey ◽  
Debasish Maitra
Keyword(s):  
Futures Markets ◽  
Market Price ◽  
Spot Market ◽  
Commodity Futures ◽  
Spot Markets ◽  
Content Type ◽  
Price Expectation ◽  
Spot Prices ◽  
Commodity Futures Markets ◽  
Plantation Crops

Purpose It has become an ongoing debate whether Indian commodity futures markets can accommodate farmers. The purpose of this paper is to examine whether Indian commodity futures markets help rationalize farmers’ price expectation. The study starts with questions on the efficiency and other roles of commodity futures markets. Design/methodology/approach From a sectoral standpoint and economic importance, the study considers pepper, coffee, and natural rubber (NR) futures and spot markets. The efficiency of futures markets, divergence/convergence and causality between futures and spot markets have been studied by employing co-integrations, error correction and causality models. The sample period of the data are taken from the inception of futures trading. These three commodities are also compared on the basis of trading at the futures markets vs spot markets. Findings Analysis shows that though pepper futures market is informationally efficient in price discovery, while coffee and NR spot markets do the process faster. Pepper and coffee futures and spot prices exhibit the convergence; NR shows a sign of divergence. Unidirectional causality from pepper futures to spot market is observed wherein the former was weakly exogenous to the latter and while, bidirectional causality is observed in coffee and rubber. Coffee spot appears weakly exogenous while this remains inconclusive in the case of NR. Research limitations/implications The authors analyzed the futures markets in rationalizing the spot market price in three plantation crops in India. In order to make the study more generalizable, further research is warranted in other commodities including those prices of which are government regulated. Originality/value The paper is unique in terms of understanding the interaction or interrelationship between futures markets and spot markets and drawing inferences about the role of futures markets in price formation in plantation commodities like pepper, coffee and NR.

Relationship between Coffee Prices in Spot and Futures Markets-An Empirical Analysis

2020 ◽  
pp. 180-188
Keyword(s):  
New York ◽  
Correlation Coefficients ◽  
Strong Relationship ◽  
Futures Market ◽  
Regression Coefficients ◽  
Futures Prices ◽  
Market Prices ◽  
Spot Prices ◽  
Correlation And Regression Analysis ◽  
Highly Correlated

The present study explored the relationship between spot and futures coffee prices. The Correlation and Regression analysis were carried out based on monthly observations of International Coffee Organization (ICO) indicator prices of the four groups (Colombian Milds, Other Milds, Brazilian Naturals, and Robustas) representing Spot markets and the averages of 2nd and 3rd positions of the Intercontinental Exchange (ICE) New York for Arabica and ICE Europe for Robusta representing the Futures market for the period 1990 to 2019. The study also used the monthly average prices paid to coffee growers in India from 1990 to 2019. The estimated correlation coefficients indicated both the Futures prices and Spot prices of coffee are highly correlated. Further, estimated regression coefficients revealed a very strong relationship between Futures prices and Spot prices for all four ICO group indicator prices. Hence, the ICE New York (Arabica) and ICE Europe (Robusta) coffee futures prices are very closely related to Spot prices. The estimated regression coefficients between Futures prices and the price paid to coffee growers in India confirmed the positive relationship, but the dispersion of more prices over the trend line indicates a lesser degree of correlation between the price paid to growers at India and Futures market prices during the study period.

Simulation of Futures and Spot Markets by Using an Agent-Based Multi-Market Model

2011 ◽  
Vol 15 (2) ◽  
pp. 204-211 ◽  
Author(s):  
Tomoko Ohi ◽  
◽  
Yasuhiro Hashimoto ◽  
Yu Chen ◽  
Hirotada Ohashi
Keyword(s):  
Statistical Properties ◽  
Trading Strategies ◽  
Market Model ◽  
Spot Markets ◽  
Futures Prices ◽  
Trading Behavior ◽  
Noise Traders ◽  
Agent Based ◽  
Spot Prices ◽  
Tail Distribution

The agent-based multi-market model we propose simulates futures and spot markets. On the basis of trading strategies in real markets, four kinds of agents - arbitragers, hedgers, speculators, and noise traders - are included in our model. Interactions of the two markets are generated through various agent trading behavior. We also statistically analyzed futures and spot prices of the Nikkei 225 index, where we found a large positive correlation between the two prices and a fat-tail distribution of the basis. Simulations results show that, instead of the conventional single-market model, only the two-market model reproduces both statistical properties of futures prices.

Understanding the Dependence Structure Between the Futures and Spot Prices of Wheat in Egypt

2019 ◽  
Vol 4 (1) ◽  
pp. 20-37
Author(s):  
Osama Ahmed ◽  
Fadi Abdelradi
Keyword(s):  
Garch Model ◽  
Spot Market ◽  
Dependence Structure ◽  
Futures Prices ◽  
Spot Prices ◽  
Price Increases ◽  
Asymmetric Behavior ◽  
Wheat Market ◽  
Copula Estimation ◽  
Parametric Copula

The aim of this article is to check the dependence structure for the futures-spot prices link of Egyptian wheat. Co-movements between prices are assessed by a GJR-GARCH model and semi-parametric copula estimation. Results suggest a positive futures-spot prices link, which becomes stronger the closer the markets are. Evidence of asymmetric behavior of the prices at times of extreme market situations is found. As a result, increases in wheat futures prices are expected to be passed to the Egyptian spot market, while the prices decline is not passed. This implies that the Egyptian wheat market cannot protect consumers against extreme international wheat price increases.

Price Discovery Analysis of Oil Futures Market: A View of Interaction Effect

2012 ◽  
Vol 433-440 ◽  
pp. 4366-4376
Author(s):  
Yong Zeng ◽  
Lei Chen
Keyword(s):  
Interaction Effect ◽  
Information Transfer ◽  
Futures Markets ◽  
Price Discovery ◽  
Futures Market ◽  
Simultaneous Equation ◽  
Spot Markets ◽  
Futures Prices ◽  
Oil Futures ◽  
Arbitrage Trading

Whether oil futures market can perform price discovery function well is very important in global economics and energy markets. The interaction between oil spot and futures prices exists due to intraday information transfer and arbitrage trading. However, the traditional methods used in price discovery analysis ignore the interaction, and thus introduce the biased conclusions. This paper uses simultaneous equation analyze the interaction effect between oil spot and futures returns, estimates the model by the method of modified identification through heteroskedasticity (modified ITH) and examines price discovery function of oil futures markets. Using weekly spot and futures prices of Brent crude oil, gas oil and heating oil between Feb 12, 1999 and Jan 30, 2009, the results suggest oil futures return will affect the corresponding oil spot return. The unidirectional interaction exists. This indicates the information will transfer from futures markets to spot markets and oil futures markets have the major price discovery function. This paper also offers a new view of examining price discovery, i.e. interaction effect.

scholarly journals Energy Market Prices in Times of COVID-19: The Case of Electricity and Natural Gas in Spain

Energies ◽  
2021 ◽  
Vol 14 (6) ◽  
pp. 1632
Author(s):  
Luis M. Abadie
Keyword(s):  
Natural Gas ◽  
Probability Distributions ◽  
Energy Market ◽  
Strong Impact ◽  
Electricity Prices ◽  
Market Prices ◽  
Spanish Society ◽  
Spot Prices ◽  
Natural Gas Prices ◽  
Almost All

The COVID-19 pandemic is having a strong impact on the economies of all countries, negatively affecting almost all sectors. This paper compares Spanish electricity and natural gas prices in the first half-year of 2020 with the prices expected for that period at the end of 2019. The half-year of 2020 selected coincides with the period of greatest impact of COVID-19 on Spanish society. Expected prices and their future probability distributions are calculated using a stochastic model with deterministic and stochastic parts; the stochastic part includes mean-reverting and jumps behaviour. The model is calibrated with 2016–2019 daily spot prices for electricity and with day-ahead prices for natural gas. The results show large monthly differences between the prices expected at the end of the year 2019 and the actual prices for the half-year; in May 2020, wholesale electricity prices are found to be EUR 31.60/MWh lower than expected, i.e., 60% lower. In the case of natural gas, the prices in the same month are EUR 8.96/MWh lower than expected, i.e., 62% lower. The spark spread (SS) is positive but lower than expected and also lower than in the same months of the previous year.

scholarly journals A Two-Stage Optimal Scheduling Model of Microgrid Based on Chance-Constrained Programming in Spot Markets

Processes ◽  
2020 ◽  
Vol 8 (1) ◽  
pp. 107 ◽  
Author(s):  
Li ◽  
Tan ◽  
Ren ◽  
Yang ◽  
Yu ◽  
...  
Keyword(s):  
Pso Algorithm ◽  
Spot Market ◽  
Optimal Scheduling ◽  
Spot Markets ◽  
Chance Constrained Programming ◽  
Two Stage ◽  
Market Prices ◽  
Scheduling Model ◽  
Proposed Model ◽  
Constrained Programming

Aimed at the coordination control problem of each unit caused by microgrid participation in the spot market and considering the randomness of wind and solar output and the uncertainty of spot market prices, a day-ahead real-time two-stage optimal scheduling model for microgrid was established by using the chance-constrained programming theory. On this basis, an improved particle swarm optimization (PSO) algorithm based on stochastic simulation technology was used to solve the problem and the effect of demand side management and confidence level on scheduling results is discussed. The example results verified the correctness and effectiveness of the proposed model, which can provide a theoretical basis in terms of reasonably coordinating the output of each unit in the microgrid in the spot market.

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