Speculation, hedging, and commodity price forescasts [by] Walter C. Labys [and] C.W.J. Granger.

  • 320 Pages
  • 2.32 MB
  • English
Heath Lexington Books , Lexington, Mass
Commodity exchanges, Prices -- Mathematical m
SeriesStudies in business, industry and technology
ContributionsGranger, Clive William John,
LC ClassificationsHG6046 L24
The Physical Object
ID Numbers
Open LibraryOL17361058M

Speculation, Hedging, and Commodity Price Forecasts Textbook Binding – January 1, by Labys, Walter C., (Author) See all formats and editions Hide other formats and editionsAuthor: Labys, Walter C. Genre/Form: Modèles mathématiques: Additional Physical Format: Online version: Labys, Walter C., Speculation, hedging, and commodity price forecasts.

Organized commodity futures trading facilitates two kinds of activity-speculation and hedging. When futures trading in a given commodity exists, the speculator generally finds it advantageous to deal in futures contracts rather than either (1) buying a quantity of the commodity at the current " spot" price and holding it in the hope of a rise.

The correlation coefficient between the spot price and the convenience yield is high and positive since the convenience yield and the spot price are related through inventory decisions (e.g. Routledge et al., ).The correlation between interest rates and spot prices is negative in accordance with Frankel and Hardouvelis () who have argued that high real interest rates reduce commodity Cited by: 9.

Description Speculation, hedging, and commodity price forescasts [by] Walter C. Labys [and] C.W.J. Granger. FB2

hedging and speculation, and periods. In summary, hedging and speculative pressures may not be helpful in explaining prices in commodity futures markets; to the contrary, prices may cause traders to change their positions.

Keywords: commitments of traders, commodity futures markets, commodity. Concerns have been raised that trading position behavior of futures market participants may have caused recent commodity price movements.

This study empirically examines whether pressures on prices due to hedging and speculative activities can be identified and whether they have changed due to structural changes in commodity futures markets.

It employs Toda–Yamamoto Granger. studies, most notably the Labys and Granger book, have placed a heavy emphasis on examining the spectral density function; however, as re- marked in [6, p. Hedging is an important tool when it comes to running a business from either of those perspectives.

A hedge will guaranty a consumer a supply of a required commodity at a set price. A hedge will guaranty a producer a known price for their commodity output. If the price of soybeans shoots up to say $13 in six months, the farmer will incur a loss of $ (sell price-buy price = $$) on the futures contract.

This book has been cited by the following publications. When those gamblers bet on price distributions in futures markets, they were redefined as 'speculators'.

Today they are called 'hedge fund managers' or 'bankers'.

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Labys, Walter C., and Granger, Hedging. (), Speculation, Hedging and Commodity Price Forecasts. Lexington, MA. Hedging and Speculative Trading in Agricultural Futures Markets. Raymond P. Fishe, Joseph P. Janzen and Aaron Smith. Abstract.

Regulators and industry participants have expressed concern excessive speculation harms that agricultural futures markets. Such harm may arise if cause prices to speculators systematically. What is Commodity Price Risk Hedging.

Details Speculation, hedging, and commodity price forescasts [by] Walter C. Labys [and] C.W.J. Granger. FB2

20 5. Methodology of Hedging Commodity Price Risk 24 6. Using Futures and Options to Hedge Commodity Price Risk 30 7. Benefits of Hedging Commodity Price Risk 34 8. Understanding Hedge Accounting 36 Contents Commodity Price Risk Management | A manual of hedging commodity price risk for corporates   Survey Commodity Price Fluctuations and Macroeconomic Adjustments in the Developed Economies Walter C.

Labors, West Virginia University, and Alfred Maize', Finance, Industry and Trade Center, Oxford Commodity price fluctuations have proven troublesome in thei- destabilizing effects on export revenues and foreign exchange earnings in developin€ countries. Description: The Journal of Economic Literature (JEL), first published inis designed to help economists keep abreast of the vast flow of issues contain commissioned, peer-reviewed survey and review articles, book reviews, an annotated bibliography of new books classified by subject matter, and an annual index of dissertations in North American universities.

Hedging vs. Speculation: An Overview. Speculators and hedgers are different terms that describe traders and investors. Speculation involves trying to make a profit from a security's price.

Chapter Hedging vs. speculation Unlike the make‐believe risks in gambling, commodity price risks are real. Changes in weather, three beliefs, (1) speculators manipulate market prices, (2) speculation causes frequent and.

Commodity risk is the financial uncertainty caused by fluctuations in the price of fluctuations are beyond control and affect future market values and future ity prices can be quite volatile partially because of their supply-demand dynamics.

In addition, geo-political risk is another important inflence factor. optimal hedging and speculation decisions for a commodity investor using both futures and option contracts. The variance-covariance (VCV) matrix in Wolf's model is generic in form, with an ordinal specification of the relationships between the matrix components (i.e., the futures and option price.

Labys et al. () studied the cyclical nature of 21 primary commodity price series (8 of them minerals, 12 agricultural products, and 1 energy-related commodity), employing monthly volatility.

Let's assume the price of soybeans is currently $13 a bushel. If the farmer knows they can turn a profit at $10, it might be wise to lock in the $13 price by selling the futures contracts. In that way, the farmer could avoid the risk that the price of soybeans would fall below $10 when they're ready to.

over commodity price speculation and how it works. Even identifying speculators, as opposed to investors or firms hedging risk, is not simple. Claiming, as Kennedy did, that anyone who buys or sells futures but does not take possession of the commodity 0 50 WTI spot price Date Figure 1.

Speculators absorb some of the risk but hedging appears to drive most commodity markets. The equilibrium futures price can be either below or above the (rationally) expected future price (backwardation or contango).

The various effects futures markets can have on market and income stability are discussed. The advent of futures markets enables farmers and producers to transfer commodity price risk using hedging strategies on the one hand, and facilitates other market participants, particularly speculators, to exploit information of futures trading to forecast the prices of underlying commodity.

Speculation, Hedging, and ArbitrageBIBLIOGRAPHYArbitrage is the simultaneous purchase and sale of equivalent assets at prices which guarantee a fixed profit at the time of the transactions, although the life of the assets and, hence, the consummation of the profit may be delayed until some future date.

The key element in the definition is that the amount of profit be determined with certainty. Hedging is performed by the hedgers to protect themselves against the risk or say to reduce the risk of the changes in the price of the underlying commodity.

On the contrary, speculators perform speculation, in an attempt to earn profit from the changes in the difference between future price and spot price, as they bet on their difference. Hedging vs. Speculating. April 4, A question that comes up from time to time is the difference between hedging and speculating, and where to draw a line between the two.

By definition, hedging involves taking a contract or position in the market that is risk-reducing, thereby cutting one’s exposure to price fluctuations.

Commodity prices can fluctuate significantly and have a real impact on the competitiveness of a buyer or farmers and producers. The risks arising from the change in commodity prices can be managed by using commodity hedging strategies.

These strategies are regularly used by people involved in a business related to a commodity being traded or. 1 Commentary – Are Higher Commodity Prices driven by Speculation or Fundamentals?– November Larry Martin is a principal in Agri-Food Management Excellence Inc., a company that specializes in management training for the agri-food sector.

He has taught courses on hedging with futures and options to over Canadians over the past 40 years. The title and book blurb though promise more - I bought the book thinking it would provide more on general principles of arbitrage, hedging and speculation.

It does have some useful stuff on these issues but we would have been better served by more. This is a book at an intermediate s: 1. Hedgers buy a futures contract to lock in a price as protection.

Hedging is about taking an opposite position in the market, with the aim of protecting against future volatility. For example, airlines turn to hedging to manage their biggest cost drain: fuel. Airline stocks often gyrate with the speculative nature of oil markets.

Downloadable! This study examines impacts of hedging and speculation shocks on cash-futures basis for three types of wheat produced in the Northwest U.S.

Volatility transfers are measured using a Bayesian vector autoregression (BVAR) procedure to capture the contemporaneous effects of cashfutures basis and open interest positions.

By applying a BVAR model and inducing stationarity. Hedging: Hedging is an act of protecting or guarding the investment against an undesired price movement. Suppose a long term investor owns a portfolio of stocks worth Rs 10 lacs.LABYS W.C., KOUASSI E.

(), “Structural Time Series Modeling of Commodity Price Cycles” Research PaperRegional Research Institute, West Virginia University LABYS W.C., YANG C.W.

(), “Spatial Price Equilibrium as the Core to Spatial Commodity Modeling”, Papers in Regional Science