Hedging pressure and speculation in commodity markets

Ivar Ekeland (), Delphine Lautier () and Bertrand Villeneuve
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Ivar Ekeland: Université Paris-Dauphine, PSL Research University
Delphine Lautier: Université Paris-Dauphine, PSL Research University

Economic Theory, 2019, vol. 68, issue 1, No 4, 83-123

Abstract: Abstract We propose a micro-founded equilibrium model to examine the interactions between the physical and the derivative markets of a commodity. This model provides a unifying framework for the hedging pressure and storage theories. The model shows a variety of behaviors at equilibrium that can be used to analyze price relations for any commodity. Further, through a comparative statics analysis, we precisely identify the losers and winners in the financialization of the commodity markets. Therefore, this paper clarifies the political economy of regulatory issues, like speculators’ influence on prices.

Keywords: Equilibrium model; Commodity; Speculation; Regulation; Futures markets; D4; G13; Q02 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (16)

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DOI: 10.1007/s00199-018-1115-y

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