scholarly journals Does the Design of Spot Markets Matter for the Success of Futures Markets? Evidence from Dairy Futures

2016 ◽  
Author(s):  
Jedrzej Pawel Bialkowski ◽  
Jan Koeman
Keyword(s):  
Futures Markets ◽  
Spot Markets

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.

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 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 Price Dependence and Futures Price Theory

1985 ◽  
Vol 14 (2) ◽  
pp. 169-176
Author(s):  
Steven C. Blank
Keyword(s):  
Beef Cattle ◽  
Futures Markets ◽  
Commodity Futures ◽  
Classification Method ◽  
Spot Markets ◽  
Price Behavior ◽  
Price Theory ◽  
Arbitrage Opportunities ◽  
Futures Price ◽  
New Interpretation

A new interpretation of commodity futures price theory is evaluated because, currently, many products exhibit price behavior which cannot be explained with existing theory. A method for classifying products according to the particular price theory relevant to them is provided. The classification method uses the futures price dependence enforced by arbitrage opportunities in spot markets as its base. The futures markets for beef cattle and corn are used as examples.

scholarly journals A New Idea for LNG Trade: Enhancing Market Competition through a Tanker-Based Trading System

2020 ◽  
Vol 4 ◽  
pp. 9-19
Author(s):  
Satoru Hashimoto
Keyword(s):  
Natural Gas ◽  
Futures Markets ◽  
Market Competition ◽  
High Rate ◽  
Spot Markets ◽  
Asian Countries ◽  
Trading System ◽  
History Of ◽  
Gas Market ◽  
Gas Supply

This study proposes a new idea for liquefied natural gas (LNG) trade based on Japan’s natural gas market. As part of their high rate of economic growth in recent decades, many Asian countries, including Japan, have constructed natural gas supply chains that are characterized by natural monopolies and vertically integrated companies. In addition, although Japan has a 50-year history of LNG imports, its domestic natural gas distribution mechanisms are not designed to create connections among markets. Therefore, domestic spot and futures markets have never operated efficiently. To promote Japanese domestic market competition, this study proposes a “tanker-based trading system” involving LNG tankers owned by a consortium of Japanese firms and supported by the Japanese government. This trading system would enhance the market efficiency of LNG-based operating countries. Thus, a spot market for natural gas in Japan and East Asia can be created using LNG tankers, and the natural gas trading system in Japan can play a role in spot markets similar to the Henry Hub and the National Balancing Point.

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.

Indian Agri-Commodities Markets: A Review of Transition Toward Futures

2021 ◽  
pp. 2516600X2110155
Author(s):  
Minakshi Kar
Keyword(s):  
Futures Markets ◽  
Risk Mitigation ◽  
Consumption Pattern ◽  
Price Risk ◽  
Spot Markets ◽  
Market Growth ◽  
Indian Agriculture ◽  
Comprehensive Survey ◽  
Food Grain ◽  
Price Risk Management

By using indications given by the commodity markets, farmers, growers, or producers can minimize the price risk and avoid a supply gut. The consumers of the output can minimize the price risk and ensure that the demand pressure is appropriately capped. It was in this backdrop that farmers and food grain merchants initiated futures markets in agri-commodities. This article has been successful in documenting the evolution of agri-commodities futures markets in India and their regulatory framework. It also captures the transition toward agri-commodities futures by engaging in a comprehensive survey of extant literature. The market growth analysis indicates that the transition toward agri-commodities futures markets has enabled price discovery and better price risk management. While ensuring price risk mitigation and remunerative returns, these markets also contribute to scaling down the downside risks associated with agricultural lending and, thereby, facilitate the flow of credit to agriculture. Further, they also hold a key role not only in reinvigorating the spot markets but also in triggering the diversified growth of Indian agriculture in line with the consumption pattern. Thus, enabling policies need to be put in place to strengthen the agri-commodities futures markets by streamlining the supply chain.

Measuring volatility spillovers and asymmetric responses of Agri commodity prices: evidence from spices and rubber futures in India

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Saji Thazhugal Govindan Nair
Keyword(s):  
Futures Markets ◽  
Commodity Prices ◽  
Futures Contracts ◽  
Spot Markets ◽  
Content Type ◽  
Volatility Spillovers ◽  
Price Series ◽  
Long Run ◽  
Short Run ◽  
Asymmetric Responses

Purpose This paper aims to investigate price responses and volatility spillovers between commodity spot and futures markets. The study ultimately seeks the evidence-based claims on the efficiency of the long run and short run horizontal price transmissions from futures markets to spot markets. Design/methodology/approach This study used the most recent daily price series of pepper, cardamom and rubber, during the period 2004–2019, use “cointegration-ECM-GARCH framework” and verify the persisting validity of the “expectancy theory” of commodity futures pricing. Findings The results offer overwhelming evidence of futures market dominance in the price discoveries and volatility spillovers in spot markets. However, this paper finds asymmetric responses between cash and futures prices across markets. The hedging efficiency of futures contracts is commodities specific’ where spices futures are more efficient than the rubber futures. Practical implications The study passes on vital information to the producers and traders of spices and rubber who have a potential interest in the use of futures contracts to make profits from arbitrage between futures and cash markets. Originality/value The paper is unique in terms of understanding asymmetric price linkages in markets for plantation crops.

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.

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