Since a major source of income for many countries comes from exporting commodities, price discovery and information transmission between commodity futures markets are key issues for continued economic development. This book covers the fundamental theory of and derivatives pricing for major commodity markets as well as the interaction between commodity prices, the real economy, and other financial markets. After an extensive theoretical and practical introduction, the book is divided into four parts: * Oil Products - considers the structural changes in the demand and supply for hedging services that are increasingly determining the price of oil *Other Commodities - examines markets related to agricultural commodities, including natural gas, wine, soybeans, corn, gold, silver, copper, and other metals *Commodity Prices and Financial Markets - investigates the contemporary aspects of the financialization of commodities, including stocks, bonds, futures, currency markets, index products, and exchange traded funds *Electricity Markets - supplies an overview of the current and future modelling of electricity markets With contributions from well-known academics and practitioners, this volume includes coverage of the fundamental theory of futures/forwards and derivatives pricing for major commodity markets. The contributions to Sections I and II of this volume, which treat storable or agricultural commodities, take speculation into account through a consideration of markets over time being either in backwardation or contango. Up-to-date considerations of both trading and investment are included in Sections I, II, and III. The book also reviews the effects of urbanization and the expanding middle-class population on commodities.
SECTION I: OIL PRODUCTS Inconvenience Yield, or the Theory of Normal Contango Ilia Bouchouev Determinants of Oil Futures Prices and Convenience Yields M. A. H. Dempster, Elena Medova, and Ke Tang Pricing and Hedging of Long-Term Futures and Forward Contracts with a Three-Factor Model Kenichiro Shiraya and Akihiko Takahashi An Empirical Study of the Impact of Skewness and Kurtosis on Hedging Decisions Jing-Yi Lai Long-Term Spread Option Valuation and Hedging M.A.H. Dempster, Elena Medova, and Ke Tang Analysing the Dynamics of the Refining Margin: Implications for Valuation and Hedging Andres Garcia Mirantes, Javier Poblacion and Gregorio Serna Quantitative Spread Trading on Crude Oil and Refined Products Markets Mark Cummins and Andrea Bucca SECTION II: OTHER COMMODITIES Inversion of Option Prices for Implied Risk-Neutral Probability Density Functions: General Theory and Its Applications to the Natural Gas Market Yijun Du, Chen Wang, and Yibing Du Investing in the Wine Market: A Country-Level Threshold Cointegration Approach Lucia Baldi, Massimo Peri, and Daniela Vandone Cross-Market Soybean Futures Price Discovery: Does the Dalian Commodity Exchange Affect the Chicago Board of Trade? Liyan Han, Rong Liang, and Ke Tang The Structure of Gold and Silver Spread Returns Jonathan A. Batten, Cetin Ciner, Brian M. Lucey, and Peter G. Szilagyi Gold and the U.S. Dollar: Tales from the Turmoil Paolo Zagaglia, Massimiliano, Marzo A Flexible Model of Term-Structure Dynamics of Commodity Prices: A Comparative Analysis with a Two-Factor Gaussian Model Hiroaki Suenaga Application of a TGARCH-Wavelet Neural Network to Arbitrage Trading in the Metal Futures Market in China Lei Cui, Ke Huang, and H.J. Cai SECTION III: COMMODITY PRICES AND FINANCIAL MARKETS Short-Horizon Return Predictability and Oil Prices Jaime Casassus and Freddy Higuera Time-Frequency Analysis of Crude Oil and S&P500 Futures Contracts Joseph McCarthy and Alexei G. Orlov Sectoral Stock Return Sensitivity to Oil Price Changes: A Double-Threshold FIGARCH Model Elyas Elyasiani, Iqbal Mansur, and Babatunde Odusami Short-Term and Long-Term Dependencies of the S&P 500 Index and Commodity Prices Michael Graham, Jarno Kiviaho, and Jussi Nikkinen Portfolio Selection with Commodities Under Conditional Copulas and Skew Preferences Carlos Gonzalez-Pedraz, Manuel Moreno, and Juan Ignacio Pena Strategic Commodity Allocation Pierre Six Long-Short Versus Long-Only Commodity Funds John M. Mulvey Commodity Markets Through the Business Cycle Julien Chevallier, Mathieu Gatumel, and Florian Ielpo The Dynamics of Commodity Prices Chris Brooks and Marcel Prokopczuk A Hybrid Commodity and Interest Rate Market Model Kay F. Pilz and E. Schlogl SECTION IV: ELECTRICITY MARKETS Modelling the Distribution of Day-Ahead Electricity Returns: A Comparison Alessandro Sapio Stochastic Spot Price Multi-Period Model and Option Valuation for Electrical Markets Eivind Helland, Timur Aka, and Eric Winnington Modelling Spikes and Pricing Swing Options in Electricity Markets Ben Hambly, Sam Howison, and Tino Kluge Efficient Pricing of Swing Options in Levy-Driven Models Oleg Kudryavtsev and Antonino Zanette Hedging Strategies for Energy Derivatives Peter Leoni, Nele Vandaele, and Michele Vanmaele The Valuation of Clean Spread Options: Linking Electricity, Emissions and Fuels Rene Carmona, Michael Coulon, and Daniel Schwarz Is the EUA a New Asset Class? Vicente Medina and Angel Pardo Index
