Séminaire
A simple equilibrium model for a commodity market with spot trades and futures contracts
Bertrand Villeneuve (Université Paris Dauphine)
Fédération des Banques Françaises Seminar
TSE, 18 mars 2013, 12h30–14h00, salle MF 323
Référence
Bertrand Villeneuve (Université Paris Dauphine), « A simple equilibrium model for a commodity market with spot trades and futures contracts », Fédération des Banques Françaises Seminar, TSE, 18 mars 2013, 12h30–14h00, salle MF 323.
Résumé
We propose a simple equilibrium model, where the physical market of the commodity and the derivative market interact. There are three types of agents: industrial processors, inventory holders and speculators. Only the two first of them operate in the physical market. All of them, however, may initiate a position in the paper market, for hedging and/or speculation purposes. We give the necessary and sufficient conditions on the fundamentals of this economy for a rational expectations equilibrium to exist and we show that it is unique. This is the first contribution of the paper. Our model exhibits a surprising variety of behaviours at equilibrium. Thus the second contribution is that the paper offers a unique generalized framework for the analysis of price relationships. The model allows for the generalization of hedging pressure theory; and it shows how this theory is connected to the storage theory. Meanwhile, it allows to study simultaneously the two main economic functions of derivative markets: hedging and price discovery. In its third contribution, through the distinction between the utility of speculation and that of hedging, the model illustrates the interest of a derivatives market in terms of the welfare of the agents.
Partenaire de recherche
Fédération des Banques Françaises Research Initiative (sustainable)