The Commodity Futures Risk Premium
Author | : Nemanja [Verfasser] Bacinac |
Publisher | : |
Total Pages | : |
Release | : 2015 |
ISBN-10 | : OCLC:1020624692 |
ISBN-13 | : |
Rating | : 4/5 (92 Downloads) |
Book excerpt: Commodity futures, as derived instruments from the larger commodity asset class, are playing a very important role in todays globalised economy, with their main task - insuring companies future values of their inputs and/or outputs. From mid-2000s investments in various commodity futures have grown significantly, along with the inherent commodity prices. A great deal of individuals as well as institutional investors have embraced this type of alternative investment instruments for their presupposed equity-like returns, risk premiums, diversification and positive inflation correlation benefits. A commodity futures investor can consistently earn his risk premium in this specific market only if the commodity futures prices are on average determined at a lower level than the expected future spot prices of underlying commodities. Models presented in this paper are in favour of the view that commodity futures investors can be, depending on a time-frame, looking forward to positive risk premiums in commodity futures markets.*****Commodity futures, as derived instruments from the larger commodity asset class, are playing a very important role in todays globalised economy, with their main task - insuring companies future values of their inputs and/or outputs. From mid-2000s investments in various commodity futures have grown significantly, along with the inherent commodity prices. A great deal of individuals as well as institutional investors have embraced this type of alternative investment instruments for their presupposed equity-like returns, risk premiums, diversification and positive inflation correlation benefits. A commodity futures investor can consistently earn his risk premium in this specific market only if the commodity futures prices are on average determined at a lower level than the expected future spot prices of underlying commodities. Models presented in this paper are in favour of the view that commodity futures investors can be, depending on a time-frame, looking forward to positive risk premiums in commodity futures markets.