Financial investors and cross-commodity markets integration

Mohammad Isleimeyyeh

Journal of Commodity Markets, 2025, vol. 38, issue C

Abstract: This article presents a model for investigating the linkages between commodity markets arising from the operation of financial investors. The model thus examines the interactions of the physical and futures markets of one commodity with those of another commodity. The framework allows the various prices (current spot, future spot, futures prices), quantities (inventory and committed demand by processors), and futures risk premiums for two commodities to be computed, thereby enabling the price relations for any two commodities to be analyzed. Through comparative statics, I identify (i) the impact of supply and demand shocks and (ii) financialization on commodity markets. Furthermore, the model demonstrates the role of cross-commodity correlation in determining the integration between commodity markets.

Keywords: Commodity markets; Equilibrium model; Financialization; Futures markets; Cross-commodity integration; Futures risk premium; Hedging (search for similar items in EconPapers)
JEL-codes: D4 G13 Q02 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jocoma:v:38:y:2025:i:c:s2405851325000054

DOI: 10.1016/j.jcomm.2025.100461

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