The Simultaneous Determination of Spot and Futures Prices

Jerome Stein

Chapter 6 in The Economics of Futures Trading, 1976, pp 124-130 from Palgrave Macmillan

Abstract: 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.

Keywords: Expected Return; Future Price; Indifference Curve; Future Contract; Substitution Effect (search for similar items in EconPapers)
Date: 1976
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-349-02693-7_7

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DOI: 10.1007/978-1-349-02693-7_7

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