Equilibrium Forward Curves for Commodities
We develop an equilibrium model of the term structure of forward prices for storable commodities. As a consequence of a nonnegativity constraint on inventory, the spot commodity has an embedded timing option that is absent in forward contracts. This option's value changes over time due to both endogenous inventory and exogenous transitory shocks to supply and demand. Our model makes predictions about volatilities of forward prices at different horizons and shows how conditional violations of the 'Samuelson effect' occur. We extend the model to incorporate a permanent second factor and calibrate the model to crude oil futures data. Copyright The American Finance Association 2000.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 55 (2000)
Issue (Month): 3 (06)
|Contact details of provider:|| Web page: http://www.afajof.org/|
More information through EDIRC
|Order Information:||Web: http://www.afajof.org/membership/join.asp|
When requesting a correction, please mention this item's handle: RePEc:bla:jfinan:v:55:y:2000:i:3:p:1297-1338. See general information about how to correct material in RePEc.
If references are entirely missing, you can add them using this form.