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Premium Separating the Roles of Speculators and Consumers: a Model of Futures Trade
Pitchford Rohan
Publication year1998
Publication title
australian economic papers
Resource typeJournals
PublisherBlackwell Publishers Ltd
The general equilibrium model of Britto (1984) is criticised. In particular, it is shown that allowing consumers to trade on the futures market leads to more complicated results than necessary. If consumers do not trade futures, and only producers and speculators do, results are greatly simplified. Consumer risk parameters, and parameters of producers production function are irrelevant. The differential between the futures price and the expected spot price, and the direction of futures trade is shown to depend in a straightforward way on the price elasticity of demand for the product on the spot market.
Subject(s)economics , financial economics , forward market , futures contract , futures market , macroeconomics , microeconomics , normal backwardation , speculation , spot contract
SCImago Journal Rank0.351

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