Modelling and measuring price discovery in commodity markets

Isabel Figuerola-Ferretti and Jesus Gonzalo

Journal of Econometrics, 2010, vol. 158, issue 1, 95-107

Abstract: In this paper we present an equilibrium model of commodity spot () and futures () prices, with finite elasticity of arbitrage services and convenience yields. By explicitly incorporating and modelling endogenously the convenience yield, our theoretical model is able to capture the existence of backwardation or contango in the long-run spot-futures equilibrium relationship, . When the slope of the cointegrating vector [beta]2>1([beta]2

Keywords: Backwardation; Cointegration; Commodity; markets; Contango; Convenience; yield; Futures; prices; Permanent-Transitory; decomposition; Price; discovery (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (91)

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Related works:
Working Paper: Modelling and Measuring Price Discovery in Commodity Markets (2008)
Working Paper: Modelling and measuring price discovery in commodity markets (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:econom:v:158:y:2010:i:1:p:95-107

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