|
Archive@NYU >
Stern School of Business >
Finance Working Papers >
Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/27873
|
| Title: | Does Hedging Affect Commodity Prices? The Role of Producer Default Risk |
| Authors: | Acharya, Viral
Lochstoer, Lars
Ramadorai, Tarun |
| Issue Date: | 6-Feb-2009 |
| Series/Report no.: | FIN-08-027 |
| Abstract: | Do hedging and speculative activity in commodity futures affect spot
prices? Yes, when commodity producers have hedging needs. We build a
model in which producers are risk-averse to future cash flow variability
and hedge using futures contracts. Increases in speculative demand for
futures reduces the cost of hedging, allowing producers to hedge more
and hold larger inventories. This pushes spot prices higher. Reductions
in speculative demand for futures have the opposite effects. The data
provide support for the hedging channel we identify - oil and gas
producers - hedging demands (proxied by their default risk), forecast
spot prices, futures prices and producers' inventories. |
| URI: | http://hdl.handle.net/2451/27873 |
| Appears in Collections: | Finance Working Papers
|
All items in Faculty Digital Archive are protected by copyright, with all rights reserved.
|
