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The Simultaneous Determination of Spot and Futures Prices

In: The Economics of Futures Trading

Author

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  • Jerome L. Stein

Abstract

This paper develops a simple geometric technique for the simultaneous determination of spot and futures prices in commodity markets; and it explains the allocation between hedged and unhedged holdings of stocks. On the basis of this analysis, it is possible to determine whether changes in spot and futures prices have occurred as a result of (a) changes in the excess supply of current production, or (b) changes in price expectations.

Suggested Citation

  • Jerome L. Stein, 1976. "The Simultaneous Determination of Spot and Futures Prices," Palgrave Macmillan Books, in: The Economics of Futures Trading, chapter 6, pages 124-130, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-02693-7_7
    DOI: 10.1007/978-1-349-02693-7_7
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    Cited by:

    1. Salisu, Afees A. & Akanni, Lateef O. & Vo, Xuan Vinh, 2021. "Volatility spillovers and hedging effectiveness between health and tourism stocks: Empirical evidence from the US," International Review of Economics & Finance, Elsevier, vol. 74(C), pages 150-159.
    2. Corbet, Shaen & Hou, Yang (Greg) & Hu, Yang & Oxley, Les, 2022. "The influence of the COVID-19 pandemic on the hedging functionality of Chinese financial markets," Research in International Business and Finance, Elsevier, vol. 59(C).
    3. Alexandre Vasconcelos Lima & Rogério Boueri Miranda & Mathias Schneid Tessmann, 2022. "Evaluation of the Future Price of Brazilian Commodities as a Predictor of the Price of the Spot Market," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 14(4), pages 1-51, April.

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