Nov 26, 2020

RCAPS Current Research Seminar Report “Equilibrium Price of Commodity Derivative Markets”

On Oct 27, RCAPS welcomed Associate Professor NAKAJIMA Katsushi from APU to deliver a RCAPS Current Research Seminar entitled “Equilibrium Price of Commodity Derivative Markets”


[Report by Assistant Professor NAKAJIMA Katsushi (APS) as the seminar organizer]

This paper studies commodity spot and forward prices. Our model considers a representative firm, which uses an input commodity to produce an output commodity, stores the commodity, and trades forward or futures commodities to hedge. We derive relations between spot, forward, and futures prices. The convenience yield can be interpreted as shadow price of storage. We compare our result with the existing models. The optimal production plan and trading strategy for spot commodity and forward are also derived. We prove the existence of equilibrium which implies that the pricing model is indeed an equilibrium price.

We had 50 audience which seems to be mostly from undergraduate of APU and affiliated universities. Since the topic was technical to most of the undergraduates, we focused on simple results and methods of the paper using examples. We also presented some connection on the method of the paper with cutting edge techniques such as machine learning. Some questions were raised such as the method of calculating the expectation of the discounted profit of a firm and the result which can be tested with data on commodity price and storage.

TOPIC
セミナー
VIEW ALL NOTICES
Connect with us:
FACEBOOK

Back to TOP