Download or read book Capturing the Risk Premium of Commodity Futures written by Devraj Basu and published by . This book was released on 2015 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt: We construct long-short factor mimicking portfolios that capture the hedging pressure risk premium of commodity futures. We consider single sorts based on the open interests of either hedgers or speculators, as well as double sorts based on both positions. The long-short hedging pressure portfolios are priced cross-sectionally and offer Sharpe ratios that systematically exceed those of long-only benchmarks. Further tests show that the hedging pressure risk premiums rise with the volatility of commodity futures markets and that the predictive power of hedging pressure over cross-sectional commodity futures returns is different from the previously documented forecasting power of past returns and the slope of the term structure.

Download or read book Time Varying Risk Premia in Futures Markets written by Mr.Manmohan S. Kumar and published by International Monetary Fund. This book was released on 1990-12-01 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper undertakes an econometric investigation into the presence of risk premium in commodity futures markets. The statistical tests are derived from a formal model of asset pricing and are applied to futures prices in a variety of commodity markets. The results suggest that for several commodities there is evidence of a time varying risk premium, particularly in futures contracts maturing six months ahead. The implications of the study for the efficiency of the futures markets and the costs of using these markets for hedging are also noted.

Download or read book The Commodity Futures Risk Premium written by Nemanja [Verfasser] Bacinac and published by . This book was released on 2015 with total page pages. Available in PDF, EPUB and Kindle. 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.

Download or read book Absolute Returns in Commodity Futures Programs written by Hilary Till and published by . This book was released on 2015 with total page 19 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper, we introduce readers to commodity (natural resource) futures programs. We begin by describing the present investment landscape as one where return compression in a number of popular hedge fund strategies has led absolute-return investors to investigate other promising return sources. This includes the highly volatile natural-resource markets.The second section discusses how (real) spot commodity prices have been in a long-term secular decline, which has meant that in the past, most arguments for investing in commodities have had to rely on one of the two following rationales. An investment in a commodity futures program has had to (1) capture cyclical opportunities, or (2) provide an inherent risk premium that has only been available in certain futures markets. This latter concept is admittedly esoteric and will be explained later in this paper.In the paper's third section we will argue that current commodity investment programs, which are designed to either capture cyclical opportunities or monetize risk premia, are still valid in the current environment. But we will further note that one can also make a plausible case for investing in commodities based on increases in spot commodity prices. In the concluding section of the paper, we will outline the risk management requirements for a commodity investment program, given that absolute-return investors require that hedge funds control downside risk.

Download or read book Capturing Full trend Profits in the Commodity Futures Markets written by Colin Alexander and published by Windsor Books/Probus. This book was released on 1992 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Professional trader Colin Alexander unveils his revolutionary long-term commodities trading plan--The Wellspring System. This remarkable technical method targets the big moves and is structured with precise entry and exit techniques to capture maximum profits from every substantial trend.

Download or read book Commodity Options written by Carley Garner and published by FT Press. This book was released on 2009-01-23 with total page 288 pages. Available in PDF, EPUB and Kindle. Book excerpt: Don’t Miss out on Today’s Hottest Trading Arena: Commodity Options! “The authors have written the definitive work on trading commodity options. Their in-depth knowledge of this subject is legendary among industry professionals and expert traders alike, and their ability to relay their knowledge through text, pictures, and the spoken word is unparalleled in our industry.” –Lan Turner, CEO, Gecko Software, Inc. “This book captures the realities of commodity option trading in a simple and easy- to-read presentation that will be beneficial for traders of all sizes and skill levels.” –Chris Jarvis, CFA, CMT, Caprock Risk Management, LLC “Even the most experienced investors often overlook the fact that options on futures are fundamentally different from options on stocks. This book fills that gap and sets the record straight with clear and concise descriptions that are easy to understand. Guaranteed to become a true source of value creation for anyone interested in trading commodity options.” –Jeff Augen, author, The Volatility Edge in Options Trading “Commodity Options arms readers with the strategies and tactics needed to take a more active approach to managing risk in today’s turbulent markets. The authors exhaustively break down every component of a commodity option to its lowest common denominator, making this book an essential piece of information for those looking to expand their trading tool box or further build on existing option strategies.” –John Netto, Chief Investment Strategist, NetBlack Capital and author, One Shot–One Kill Trading Investors worldwide are discovering the enormous opportunities available through commodity options trading. However, because commodities have differing underlying characteristics from equities, commodity ­options behave differently as well. In this book, two of the field’s most respected analysts present strategies built from the ground up for commodity options. Carley Garner and Paul Brittain begin with a quick primer on how commodity options work, how they evolved, and why conventional options strategies often fail in the commodity options markets. Next, using detailed examples based on their own extensive research, they show how to leverage the unique characteristics of commodity options in your own trades. You’ll walk through trades from “top to bottom,” master both long- and short-option approaches, and learn powerful strategies usually ignored in options books. For example, the authors introduce synthetic swing trading strategies that systematically reduce volatility from the market. This book’s easy-to-use trading strategies are strategically employed by the author’s clients every day: With Commodity Options, you can work to put the odds in your favor, too! • Why commodity options are different—and what it means to you Understand key differences in the underlying assets and the logistics of market execution • Systematically rewrite the odds in your favor Four ways to make winning trades more likely—and losing trades less common • When to trade short options—and how to manage the risk Why careful option selling may improve your odds of success • Master strategies designed for diverse market conditions Combine long and short options to create the right strategy for any market opportunity • Exploit short-lived trends through “synthetic” swing trading Get the advantages of futures contracts without the volatility

Download or read book Risk Premia and Price Volatility in Futures Markets written by G. S. Maddala and published by . This book was released on 1990 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Fundamentals of Commodity Futures Returns written by Gary B. Gorton and published by . This book was released on 2012 with total page 62 pages. Available in PDF, EPUB and Kindle. Book excerpt: Commodity futures risk premiums vary across commodities and over time depending on the level of physical inventories. The convenience yield is a decreasing, non-linear function of inventories. Price measures, such as the futures basis, prior futures returns, prior spot returns, and spot price volatilities reflect the state of inventories and are informative about commodity futures risk premiums. We verify these theoretical predictions using a comprehensive dataset on 31 commodity futures and physical inventories between 1971 and 2010. While the positions of participants in futures markets vary with both returns and the state of inventories, we find no evidence that they predict risk premiums on commodity futures.

Download or read book The Risk and Return of Active Vs Passive Trading Strategies with Commodity Futures written by Hui Jiang and published by . This book was released on 2008 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book An Anatomy of Commodity Futures Risk Premia written by Marta Szymanowska and published by . This book was released on 2014 with total page 73 pages. Available in PDF, EPUB and Kindle. Book excerpt: We identify two types of risk premia in commodity futures returns: spot premia related to the risk in the underlying commodity, and term premia related to changes in the basis. Sorting on forecasting variables such as the futures basis, return momentum, volatility, inflation, hedging pressure, and liquidity, results in sizable spot premia in the high-minus-low sorted portfolios between 5% and 14% per annum and term premia between 1% and 3% per annum. We show that a single factor, the high-minus-low portfolio from basis sorts, explains the cross-section of spot premia. Two additional basis factors are needed to explain the term premia.

Download or read book Time Varying Risk Premia in Futures Markets written by Graciela Kaminsky and published by . This book was released on 2006 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper undertakes an econometric investigation into the presence of risk premium in commodity futures markets. The statistical tests are derived from a formal model of asset pricing and are applied to futures prices in a variety of commodity markets. The results suggest that for several commodities there is evidence of a time varying risk premium, particularly in futures contracts maturing six months ahead. The implications of the study for the efficiency of the futures markets and the costs of using these markets for hedging are also noted.

Download or read book Residual Risk Trading Costs and Commodity Futures Risk Premia written by David A. Hirshleifer and published by . This book was released on 2008 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Trading costs, in the form either of explicit charges or of the costs of becoming informed, limit the participation of some classes of traders in commodity futures markets. When speculators face a fixed cost of participating in a futures market that is used by commodity producers to hedge their stochastic revenues, the futures risk premium deviates from the perfect markets prediction. The deviation rises in absolute value with the square root of the trading cost and with the standard deviation of residual returns, and it is unrelated to the covariance of the futures price with producers' nonmarketable wealths. The residual-risk premium depends not on the total magnitude of the risk that producers hedge (i.e., aggregate revenue variance), but on the variability of their revenue relative to its mean (i.e., the coefficient of variation). Hence, even a commodity that constitutes a minor fraction of aggregate consumption may have a large premium for residual risk if the revenue derived from it has a large coefficient of variation.

Download or read book A Revised Hedging Model of the Risk Premium in the Commodities Futures Markets written by Stacie Ellen Beck and published by . This book was released on 1987 with total page 388 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Handbook of Commodity Investing written by Frank J. Fabozzi and published by John Wiley & Sons. This book was released on 2008-07-08 with total page 1018 pages. Available in PDF, EPUB and Kindle. Book excerpt: Filled with a collection of information from experts in the commodity investment industry, this detailed guide shows readers how to successfully incorporate commodities into their portfolios. The handbook covers a range of issues, including the risk and return of commodities and diversification benefits.

Download or read book Scarcity Risk Premiums and the Pricing of Commodity Futures written by Marco Haase and published by . This book was released on 2013 with total page 219 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Fundamentals of Commodity Futures Returns written by Gary Gorton and published by . This book was released on 2007 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: Commodity futures risk premiums vary across commodities and over time depending on the level of physical inventories, as predicted by the Theory of Storage. Using a comprehensive dataset on 31 commodity futures and physical inventories between 1969 and 2006, we show that the convenience yield is a decreasing, non-linear relationship of inventories. Price measures, such as the futures basis, prior futures returns, and spot returns reflect the state of inventories and are informative about commodity futures risk premiums. The excess returns to Spot and Futures Momentum and Backwardation strategies stem in part from the selection of commodities when inventories are low. Positions of futures markets participants are correlated with prices and inventory signals, but we reject the Keynesian "hedging pressure" hypothesis that these positions are an important determinant of risk premiums.

Download or read book The Economics of Futures Trading written by B. A. Goss and published by John Wiley & Sons. This book was released on 1976 with total page 252 pages. Available in PDF, EPUB and Kindle. Book excerpt: