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Macro Dynamics and Labor-Saving Innovation: US vs. Japan

Author

Listed:
  • Kenichiro Shiraya

    (Mizuho-DL Financial Technology Co., Ltd.)

  • Akihiko Takahashi

    (Faculty of Economics, University of Tokyo)

Abstract

This paper proposes a new three-factor model with stochastic mean reversions for commodity prices and derives the closed-form solution for the term structure of futures prices. Moreover, it is confirmed that the prices of crude oil and copper futures prices estimated by our model replicate the observed ones very well. Finally, detailed performance analysis of hedging illiquid long-term futures and forwards with liquid short and medium-term futures shows the validity of our method.

Suggested Citation

  • Kenichiro Shiraya & Akihiko Takahashi, 2007. "Macro Dynamics and Labor-Saving Innovation: US vs. Japan," CIRJE F-Series CIRJE-F-529, CIRJE, Faculty of Economics, University of Tokyo.
    • Handle: RePEc:tky:fseres:2007cf529
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