Abstract
We analyse forward prices observed at the Fishpool market, and propose a two-factor continuous-time stochastic process for modelling the time dynamics. The data analysis reveals that the two factors can be assumed to be a non-stationary compound Poisson process and a stationary continuous-time autoregressive dynamics, describing the bumps observed in the forward curves. We use the model to analyse the risk premium in the forward markets, and find a negative premium in the long end of the market which is in line with the theory of normal backwardation. However, contracts with short time to maturity have a risk premium with randomly changing sign, pointing towards a hedging pressure also induced by the demand-side of the market.
Original language | English (US) |
---|---|
Article number | 100122 |
Journal | Journal of Commodity Markets |
Volume | 21 |
DOIs | |
State | Published - Mar 2021 |
All Science Journal Classification (ASJC) codes
- Finance
- Economics and Econometrics
Keywords
- Autoregressive models in continuous time
- Futures prices
- Salmon futures