Search results for "Forward contract"
showing 3 items of 3 documents
Multivariate modeling and analysis of regional ocean freight rates
2018
Abstract In this paper, we propose a new multivariate model for the dynamics of regional ocean freight rates. We show that a cointegrated system of regional spot freight rates can be decomposed into a common non-stationary market factor and stationary regional deviations. The resulting integrated CAR process is new to the literature. By interpreting the common market factor as the global arithmetic average of the regional rates, both the market factor and the regional deviations are observable which simplifies the calibration of the model. Moreover, forward contracts on the market factor can be traded in the Forward Freight Agreement (FFA) market. We calibrate the model to historical spot r…
Price and volatility dynamics between electricity and fuel costs: Some evidence for Spain
2012
Abstract The purpose of this study is to investigate the causal linkages between the Spanish electricity, Brent crude oil and Zeebrugge (Belgium) natural gas 1-month-ahead forward prices. Following Lutkepohl et al. (2004), we control for the presence of a structural change in the series and then we use the Johansen cointegration test and a vector error correction model (VECM) to embrace the analysis. Additionally, a multivariate generalized autoregressive conditional heteroskedastic (GARCH) model is applied to explore volatility interactions between the three markets involved in the study. Our findings reveal that Brent crude oil and Zeebrugge natural gas forward prices play a prominent rol…
On the Pricing and Hedging of Options on Commodity Forward and Futures Contracts - A Note
2007
In recent years there appeared some organized markets for forward contracts and options on these contracts. In this paper we review shortly the organization of trade on a centralized forward market. Assuming a friction-free market with constant interest rate we build a consistent continuous time framework for the valuation and hedging of options on a forward or a futures contract. This framework takes into account the peculiarities of a forward/futures contract. In our framework we consider the pricing and hedging of options on a forward contract and reconsider the Black-76 model for the pricing and hedging of options on a futures contract.