The Long-Term Structure of Commodity Futures
AbstractFutures markets on agricultural commodities typically trade with maximum maturity dates of less than four years. If these markets did trade with maturities eight or ten years distant, futures prices would have value as price forecasts and as a way to structure long-term swaps and insurance contracts. Agricultural commodity markets generally exhibit mean reversion in spot prices and convenience yields. Spot markets also exhibit seasonality. This study develops and implements a procedure to generate long-term futures curves from existing futures prices. Data on lean hogs and soybeans are used to show that the method provides plausible results.
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Bibliographic InfoPaper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 34992.
Date of creation: 20 Mar 2012
Date of revision:
Publication status: Published in American Journal of Agricultural Economics, April 2012, vol. 94 no. 3, pp. 718-735
Contact details of provider:
Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
Phone: +1 515.294.6741
Fax: +1 515.294.0221
Web page: http://www.econ.iastate.edu
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Commodity markets; futures; Bayesian statistics; mean reversion; seasonality;
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