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A Term Structure Model for Commodity Prices: Does Storability Matter?

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  • Lin, Chuanyi
  • Roberts, Matthew C.

Abstract

Econometric models of commodity prices have been estimated for more than 80 years, but both structural and time series models require ad hoc assumptions to capture all the features of commodity price series. Commodities can be broadly divided into two categories: storable and non-storable. The purpose of this study is to investigate the effects of storability on commodity futures pricing, especially whether meats can be reasonably approximated by storable commodity term structure models. From the empirical analysis of seven commodity futures prices, the two-factor Schwartz model is found to perform well for less storable commodities.

Suggested Citation

  • Lin, Chuanyi & Roberts, Matthew C., 2006. "A Term Structure Model for Commodity Prices: Does Storability Matter?," 2006 Conference, April 17-18, 2006, St. Louis, Missouri 18993, NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    • Handle: RePEc:ags:ncrsix:18993
    DOI: 10.22004/ag.econ.18993
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    Cited by:

    1. Power, Gabriel J. & Turvey, Calum G., 2008. "On Term Structure Models of Commodity Futures Prices and the Kaldor-Working Hypothesis," 2008 Conference, April 21-22, 2008, St. Louis, Missouri 37608, NCCC-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.

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    Keywords

    Demand and Price Analysis;

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