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Seminario: An equilibrium model for spot and forward prices of commodities

Venerdì 24 Aprile 2015, ore 10:00 - Aula 1BC45 - Antonis Papapantoleon

ARGOMENTI: Seminari

Venerdì 24 Aprile 2015 alle ore 10:00 in Aula 1BC45, Antonis Papapantoleon terrà un seminario dal titolo "An equilibrium model for spot and forward prices of commodities".

Abstract
The aim of this project is to determine the forward price of a consumption commodity via the interaction of agents in the spot and forward commodity market. We consider a market model that consists of three agents: producers of the commodity, consumers and financial investors (sometimes also called speculators). Producers produce a fixed amount of the commodity at each time point, but can choose how much they offer in the spot market and store the rest for selling at the next time period. They also have a position in forward contracts in order to hedge the commodity price uncertainty. Consumers are setting the spot price of the commodity at each time point by their demand. Finally, investors are investing in the financial markets and, in order to diversify their portfolios, also in the forward commodity market. The equilibrium prices for the commodity are the ones that clear out the spot and forward markets. We assume that producers and investors are utility maximizers and have exponential preferences, while the consumers' demand function is linear. Moreover, the exogenously priced financial market and the demand function are driven by Lévy processes. We solve the maximization problem for each agent and prove the existence of an equilibrium. This setting allows to derive explicit solutions for the equilibrium prices and to analyze the dependence of prices on the model parameters and the agent's risk aversion.
This is joint work with Michail Anthropelos and Michael Kuppe