RT Journal Article
SR Electronic
T1 Scarcity, Risk Premiums, and the Pricing<br/>of Commodity Futures: <em>The Case of Crude Oil Contracts</em>
JF The Journal of Alternative Investments
FD Institutional Investor Journals
SP 43
OP 71
DO 10.3905/jai.2013.16.1.043
VO 16
IS 1
A1 Marco Haase
A1 Heinz Zimmermann
YR 2013
UL https://pm-research.com/content/16/1/43.abstract
AB In this article, risk premiums of commodity futures are directly related to the physical scarcity of commodities. For this purpose the authors propose a simple decomposition of spot prices into a pure asset price plus a scarcity related price component. This replaces the traditional convenience yield that results from an imperfect no-arbitrage relationship of the term structure of commodity futures prices. The empirical tests confirm that two separate commodity-specific risk premiums affect the pricing of crude oil futures contracts: a net hedging pressure premium and a scarcity premium. The two premiums show different cyclical characteristics. The authors also find that asset market risk factors such as exchange rates or stock market shocks affect the term structure of oil futures prices in a much more homogeneous way than commodity-specific hedging pressure or scarcity shocks do.TOPICS: Commodities, futures and forward contracts, statistical methods, performance measurement