The influence of futures on spot prices is investigated in a two-date-one-period model with storage. The characterization of storage firms as hedgers is new in the literature and sheds light on the way futures affect spot prices in the presence of storage. The paper proves, on analytical grounds, a stabilizing influence of futures on spot priceswhen storage decisions are taken.
Futures markets and spot price volatility: a model for a storable commodity / Torricelli, Costanza. - In: EUROPEAN JOURNAL OF POLITICAL ECONOMY. - ISSN 0176-2680. - STAMPA. - 10:(1994), pp. 339-355.
Futures markets and spot price volatility: a model for a storable commodity
TORRICELLI, Costanza
1994
Abstract
The influence of futures on spot prices is investigated in a two-date-one-period model with storage. The characterization of storage firms as hedgers is new in the literature and sheds light on the way futures affect spot prices in the presence of storage. The paper proves, on analytical grounds, a stabilizing influence of futures on spot priceswhen storage decisions are taken.
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