Commodity Financialization: Risk Sharing and Price Discovery in Commodity Futures Markets

2015 ◽  
Author(s):  
Itay Goldstein ◽  
Liyan Yang
Keyword(s):  
Risk Sharing ◽  
Futures Markets ◽  
Price Discovery ◽  
Commodity Futures ◽  
Commodity Futures Markets

scholarly journals Risk Transmission between Chinese and U.S. Agricultural Commodity Futures Markets—A CoVaR Approach

2019 ◽  
Vol 11 (1) ◽  
pp. 239 ◽  
Author(s):  
Yangmin Ke ◽  
Chongguang Li ◽  
Andrew M. McKenzie ◽  
Ping Liu
Keyword(s):  
Value At Risk ◽  
Futures Markets ◽  
Price Discovery ◽  
Commodity Futures ◽  
Conditional Value At Risk ◽  
Chinese Government ◽  
Agricultural Commodity ◽  
Futures Exchanges ◽  
Commodity Futures Markets ◽  
Agricultural Futures

Commodity futures markets play an important role, through risk management and price discovery, in helping firms make sustainable production and marketing decisions. An important related issue is how pricing signals between futures exchanges impact traders’ risk. We address this issue by shedding light on risk transmission between the most mature (U.S.) and the fastest growing (Chinese) commodity futures markets. Gaining greater insight of risk transmission between these key markets is vitally important to firms engaged in the efficient and sustainable trade of commodities needed to feed the world. We examine the risk transmission between Chinese and U.S. agricultural futures markets for soybean, corn, and sugar with a Copula based conditional value at risk (CoVaR) approach. We find significant upside, and to a lesser extent downside risk transmission, between Chinese and U.S. markets. We confirm the dominant pricing role of U.S. agricultural futures markets while acknowledging the increasing price discovery role performed by Chinese markets. Our results highlight that soybean markets exhibit greater risk transmission than sugar and corn markets. We argue that our findings may be explained by Chinese government policy intervention, and by the large role played by U.S. firms in the underlying cash commodity markets–both in terms of production and trade.

scholarly journals Measuring price discovery between nearby and deferred contracts in storable and nonstorable commodity futures markets

2020 ◽  
Vol 51 (6) ◽  
pp. 825-840
Author(s):  
Zhepeng Hu ◽  
Mindy Mallory ◽  
Teresa Serra ◽  
Philip Garcia
Keyword(s):  
Futures Markets ◽  
Price Discovery ◽  
Commodity Futures ◽  
Commodity Futures Markets

Anomalies in Commodity Futures Markets: Risk or Mispricing?

2020 ◽  
Author(s):  
Fabian Hollstein ◽  
Marcel Prokopczuk ◽  
Björn Tharann
Keyword(s):  
Futures Markets ◽  
Commodity Futures ◽  
Commodity Futures Markets

Financialization of Commodity Markets

2018 ◽  
Author(s):  
Kyle J. Putnam
Keyword(s):  
Business Cycle ◽  
Futures Markets ◽  
Commodity Price ◽  
Commodity Markets ◽  
Commodity Futures ◽  
Futures Prices ◽  
Price Behavior ◽  
Risk And Return ◽  
Commodity Futures Markets ◽  
Asset Class

In the early 2000s, financial investors began pouring billions of dollars into the commodity futures markets seeking the unique investment benefits of this distinct asset class. This “financialization” process has called into question the fundamental risk and return properties of commodity futures as evidence has emerged favoring the idea that the massive increase in investor flows caused a rise in futures prices, volatility, and intra- and intermarket return correlations. However, a contrarian line of research contends that the effects of the new “speculative” capital on the futures markets are unsubstantiated and the increased participation of financial investors poses little consequence to the economics of the marketplace. This latter line of literature maintains that the investment benefits of commodity futures have not been diminished and that fundamental factors and business cycle variations can explain the observed changes in commodity price behavior.

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