Analysis of the risk premium in the forward market for salmon
Fred Espen Benth,
Anne Maria Eikeset,
Simon Asher Levin and
Wanjuan Ren
Journal of Commodity Markets, 2021, vol. 21, issue C
Abstract:
We analyse forward prices observed at the Fishpool market, and propose a two-factor continuous-time stochastic process for modelling the time dynamics. The data analysis reveals that the two factors can be assumed to be a non-stationary compound Poisson process and a stationary continuous-time autoregressive dynamics, describing the bumps observed in the forward curves. We use the model to analyse the risk premium in the forward markets, and find a negative premium in the long end of the market which is in line with the theory of normal backwardation. However, contracts with short time to maturity have a risk premium with randomly changing sign, pointing towards a hedging pressure also induced by the demand-side of the market.
Keywords: Salmon futures; Autoregressive models in continuous time; Futures prices (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations:
Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S240585131930087X
Full text for ScienceDirect subscribers only
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:eee:jocoma:v:21:y:2021:i:c:s240585131930087x
DOI: 10.1016/j.jcomm.2019.100122
Access Statistics for this article
Journal of Commodity Markets is currently edited by Marcel Prokopczuk, Betty Simkins and Sjur Westgaard
More articles in Journal of Commodity Markets from Elsevier
Bibliographic data for series maintained by Catherine Liu ().