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Spot Market (spot + market)

Distribution by Scientific Domains

Business, Economics, Finance and Accounting	89%
2 Other Domains	11%

Distribution within Business, Economics, Finance and Accounting

General & Introductory Economics	16%
Agricultural Economics & Resource Management	11%

Selected Abstracts

Efficiency of the German electricity wholesale market

EUROPEAN TRANSACTIONS ON ELECTRICAL POWER, Issue 4 2009
Christian Growitsch
Abstract One of the major challenges of liberalising European electricity markets is to create competitive and efficient power trading markets. In this paper, we assess the overall efficiency of the German electricity wholesale market using cointegration analysis and error correction modelling. Applying these techniques allows us to evaluate the wholesale market efficiency in terms of price adjustments and the rapidity towards the adjustment in the price discovery and adjustment process. We show that the wholesale market seems to be inefficient and not well functioning. The inability of European Energy Exchange spot market in providing an efficient price reference to the power market suggest that the power exchange still lacks liquidity. Second, our results indicate that bilateral contracts keep the wholesale electricity prices intact with the EEX prices and also stabilise the volatility in the German wholesale market. Also, the econometric results suggest that the existence of the OTC market along with power exchange is creating a competitive effect in the wholesale market in Germany. Copyright © 2009 John Wiley & Sons, Ltd. [source]

FUTURES MARKETS AND BUBBLE FORMATION IN EXPERIMENTAL ASSET MARKETS*

PACIFIC ECONOMIC REVIEW, Issue 2 2006
Charles Noussair
In addition to a spot market, there are futures markets in operation, one maturing at the beginning of each period of the life of the asset. We find that when futures markets are present, bubbles do not occur in the spot markets. The futures markets seem to reduce the speculation and the decision errors that appear to give rise to price bubbles in experimental asset markets. [source]

Do small traders contribute to price discovery?

THE JOURNAL OF FUTURES MARKETS, Issue 2 2010
Evidence from the Hong Kong Hang Seng Index markets
Using one-contract-size trades in the Mini Hang Seng Index futures to proxy the activities of small traders, this study empirically investigates the information contribution of small futures traders to price discovery on the Hang Seng Index (HSI) markets. Estimated with the models of Gonzalo, J., and Granger, C. W. J. (1995) and Hasbrouck, J. (1995), the results show that small traders contribute about 16.8% to price discovery, a disproportionately high share considering their relatively low trading volume. The results also indicate that the Hang Seng Index futures (HSIF) market still has the largest information share (about 71.0%), whereas the HSI spot market has a 12.2% share. Our results suggest that small traders are not uninformed in the HSIF markets, and play an important role in price discovery. © 2009 Wiley Periodicals, Inc. Jrl Fut Mark 30:156,174, 2010 [source]

Do futures lead price discovery in electronic foreign exchange markets?

THE JOURNAL OF FUTURES MARKETS, Issue 2 2009
Juan Cabrera
Using intraday data, this study investigates the contribution to the price discovery of Euro and Japanese Yen exchange rates in three foreign exchange markets based on electronic trading systems: the CME GLOBEX regular futures, E-mini futures, and the EBS interdealer spot market. Contrary to evidence in equity markets and more recent evidence in foreign exchange markets, the spot market is found to consistently lead the price discovery process for both currencies during the sample period. Furthermore, E-mini futures do not contribute more to the price discovery than the electronically traded regular futures. © 2008 Wiley Periodicals, Inc. Jrl Fut Mark 29:137,156, 2009 [source]

Tick sizes and relative rates of price discovery in stock, futures, and options markets: Evidence from the Taiwan stock exchange

THE JOURNAL OF FUTURES MARKETS, Issue 1 2009
Yu-Lun Chen
This study examines the competition in price discovery among stock index, index futures, and index options in Taiwan. The price-discovery ability of the Taiwan Top 50 Tracker Fund, an exchange-traded fund based on the Taiwan 50 index is examined. The authors find that, after the minimum tick size in the stock market decreases, the bid,ask spreads of the component stocks of the stock index and the Taiwan Top 50 Tracker Fund get lower, and the contribution of the spot market to price discovery increases. © 2008 Wiley Periodicals, Inc. Jrl Fut Mark 29:74,93, 2009 [source]

Price discovery in the foreign exchange futures market

THE JOURNAL OF FUTURES MARKETS, Issue 11 2006
Yiuman Tse
Examination is made of the relative contributions to price discovery of the floor and electronically traded euro FX and Japanese yen futures markets and the corresponding retail on-line foreign exchange spot markets. GLOBEX electronic futures contracts provide the most price discovery in the euro; the on-line trading spot market provides the most in the Japanese yen. The floor-traded futures markets contribute the least to price discovery in both the euro and the Japanese yen markets. The overall results show that electronic trading platforms facilitate price discovery more efficiently than floor trading. Futures traders may also extract information from on-line spot prices. © 2006 Wiley Periodicals, Inc. Jrl Fut Mark 26:1131,1143, 2006 [source]

Price discovery in the hang seng index markets: Index, futures, and the tracker fund

THE JOURNAL OF FUTURES MARKETS, Issue 9 2004
Raymond W. So
In this paper, price discovery among the Hang Seng Index markets is investigated using the Hasbrouck and Gonzalo and Granger common-factor models and the multivariate generalized autoregressive conditional heteroskedasticity (M-GARCH) model. Minute-by-minute data from the Hang Seng Index, Hang Seng Index futures, and the tracker fund show that the movements of the three markets are interrelated. The futures markets contain the most information, followed by the spot market. The tracker fund does not contribute to the price discovery process. The three markets exhibit spillover effects, indicating that their second moments are linked, even though the flow of information from the tracker fund to the other markets is minimal. Overall results suggest that the three markets have different degrees of information processing abilities, although they are governed by the same set of macroeconomic fundamentals. © 2004 Wiley Periodicals, Inc. Jrl Fut Mark 24:887,907, 2004 [source]

The effectiveness of coordinating price limits across futures and spot markets

THE JOURNAL OF FUTURES MARKETS, Issue 6 2003
Pin-Huang Chou
We extend the work of Brennan (1986) to investigate whether the imposition of spot price limits can further reduce the default risk and lower the effective margin requirement for a futures contract that is already under price limits. Our results show that spot price limits do indeed further reduce the default risk and margin requirement effectively. In addition, the more precise the information is that comes from the spot market, the more the spot price limit rule constrains the information available to the losing party. The default probability, contract costs, and margin requirements are then lowered to a greater degree. Furthermore, for a given margin, both spot price limits and futures price limits can partially substitute for each other in ensuring contract performance. The common practice of imposing equal price limits on both the spot and futures markets, though not coinciding with the efficient contract design, has a lower contract cost and margin requirement than that without imposing spot price limits. © 2003 Wiley Periodicals, Inc. Jrl Fut Mark 23:577,602, 2003 [source]

The economic advantage of learners in a spot/futures market

THE JOURNAL OF FUTURES MARKETS, Issue 2 2003
Scott C. Linn
This article examines the economic advantage of learners in a futures market. We develop a dynamic model of learning in which a spot market and futures market both exist for a real good. The economy is composed of producers who can engage in hedging activities, speculators who trade in the futures market, and consumers who are described by an inverse demand function for the underlying commodity. Producers and speculators are heterogeneous and are differentiated based upon the predictive equations they employ when formulating forecasts of next period's spot price. We derive the dynamic rational-expectations equilibrium of the model and show that learners enjoy an economic advantage in the futures market. © 2003 Wiley Periodicals, Inc. Jrl Fut Mark 23:151,167, 2003 [source]

Trading activity in stock index futures markets: The evidence of emerging markets

THE JOURNAL OF FUTURES MARKETS, Issue 10 2002
Yu Chuan Huang
This study investigates the trading activity of the Taiwan Futures Exchange (TAIFEX) and Singapore Exchange Derivatives Trading Limited (SGX-DT) Taiwan Stock Index Futures markets by analyzing the intraday patterns of volume and volatility. In addition, the market closure theory, which may explain such patterns, is examined. Overall, the trading pattern appears to be U-shaped for the TAIFEX futures and U+W-shaped for the SGX-DT. For the SGX-DT futures, volatility follows the same pattern as that of the number of price changes. For the TAIFEX futures, however, after the peak at the close of the spot market, the volatility in the TAIFEX futures drops consistently until the end of the day while volatility in the SGX-DT still reaches a smaller peak at the close of the futures market. In addition, a visual inspection of the intraday patterns of these two markets shows that the market closure theory can effectively explain the intraday patterns of these two markets. The empirical results support the market closure theory in that liquidity demand from traders rebalancing their portfolios before and after market closures creates larger volume and volatility at both the open and close. © 2002 Wiley Periodicals, Inc. Jrl Fut Mark 22:983,1003, 2002 [source]

The dynamics of the relationship between spot and futures markets under high and low variance regimes

APPLIED STOCHASTIC MODELS IN BUSINESS AND INDUSTRY, Issue 6 2009
Ming-Yuan Leon Li
Abstract This investigation is one of the first studies to examine the dynamics of the relationship between spot and futures markets using the Markov-switching vector error correction model. Three mature stock markets including the U.S. S&P500, the U.K. FTSE100 and the German DAX 30, and two emerging markets including the Brazil Bovespa and the Hungary BSI, are used to test the model, and the differences between the two sets of markets are examined. The empirical findings of this study are consistent with the following notions. First, after filtering out the high variance regime, the futures price is shown to lead the spot price in the price discovery process, as demonstrated by prior studies; conversely, the spot market is more informationally efficient than the futures market under the high variance condition. Second, the price adjustment process triggered by arbitrage trading between spot and futures markets during a high variance state is greater in scale than that based on a low variance state, and the degree of the co-movement between spot and futures markets is significantly reduced during the high variance state. Third, a crisis condition involved in the high variance state is defined for the two emerging markets, whereas an unusual condition is presented for the three mature markets. Last, the lagged spot,futures price deviations perform as an information variable for the variance-turning process. However, the portion of the variance-switching process accounted for by this signal variable is statistically marginal for the three mature markets selected for this study. Copyright © 2008 John Wiley & Sons, Ltd. [source]

Marketing preferences of small-scale farmers in the context of new agrifood systems: a stated choice model

AGRIBUSINESS : AN INTERNATIONAL JOURNAL, Issue 2 2009
Jose Blandon
Considering the dynamic changes in agrifood systems in developing countries, this study uses a stated choice model to explore the marketing preferences of small-scale producers of fresh fruits and vegetables in Honduras. Eight attributes, proposed in hypothetical contracts to farmers, are evaluated. The results suggest that farmers have strong marketing preferences associated with new supply chains, such as prearranging prices and quantities with buyers, but have remaining preferences for some attributes of traditional spot markets, such as the lack of grading produce, receiving cash payments, lack of delivery schedules, ability to sell at the farm gate, and ability to sell individually. Further, farmers prefer market channels that do not require major upfront investments. The results suggest that the traditional marketing preferences of farmers could impede participation of small-holders in emerging supply chains and take advantage of the potential opportunities that new agrifood supply chains can offer. [JEL Code: Q13 O14]. © 2009 Wiley Periodicals, Inc. [source]

Spot water markets and risk in water supply

AGRICULTURAL ECONOMICS, Issue 2 2005
Javier Calatrava
Water markets; Economic risk; Water availability; Irrigated agriculture Abstract Water availability patterns in semiarid regions are typically extremely variable. Even in basins with a highly developed infrastructure, users are subject to unreliable water supplies, incurring substantial economic losses during periods of scarcity. More flexible instruments, such as voluntary exchanges of water among users, can help users to reduce risk exposure. This article looks at the effects of spot water markets on the economic risk caused by water availability variations. Our theoretical and empirical risk analyses are based on the random profits of water users. Profit probability density functions are formally and graphically characterized for both water sellers and buyers under several possible market outcomes. We conclude from this analysis that, where water supply is stochastic, water markets unambiguously reduce both parties' risk exposure. The empirical study is conducted on an irrigation district in the Guadalquivir Valley (Southern Spain), where there is a high probability of periods of extreme water scarcity. Water demand functions for the district representative irrigators and a spatial equilibrium model are used to simulate market exchanges and equilibrium. This programming model is combined with statistical simulation techniques. We show that the profit probability distribution of a representative irrigator is modified if water exchanges are authorized, leading to risk reductions. Results also indicate that if the market were extended to several districts and users that are subject to varying hydrological risk exposure, extremely low-profit events would be less likely to occur. In sum, we show that exchanging water in annual spot markets can reduce farmers' economic vulnerability caused by water supply variability across irrigation seasons. These results support the water policy reform carried out in Spain in 1999 to allow for voluntary water exchanges among right holders. [source]

The efficiency of natural gas futures markets

OPEC ENERGY REVIEW, Issue 2 2003
Ahmed El Hachemi Mazighi
Recent experience with the emergence of futures markets for natural gas has led to many questions about the drivers and functioning of these markets. Most often, however, studies lack strong statistical support. The objective of this article is to use some classical statistical tests to check whether futures markets for natural gas (NG) are efficient or not. The problem of NG market efficiency is closely linked to the debate on the value of NG. More precisely, if futures markets were really efficient, then: 1) spot prices would reflect the existence of a market assessment, which is proof that speculation and the manipulation of prices are absent; 2) as a consequence, spot prices could give clear signals about the value of NG; and 3) historical series on spot prices could serve as "clean" benchmarks in the pricing of NG in long-term contracts. On the whole, since the major share of NG is sold to power producers, the efficiency of futures markets implies that spot prices for NG are driven increasingly by power prices. On the other hand, if futures markets for natural gas fail the efficiency tests, this will reflect: 1) a lack of liquidity in futures markets and/or possibilities of an excess return in the short term; 2) a pass-through of the seasonality of power demand in the gas market; 3) the existence of a transitory process, before spot markets become efficient and give clear signals about the value of NG. Using monthly data on three segments of the futures markets, our findings show that efficiency is almost completely rejected on both the International Petroleum Exchange in London (UK market) and the New York Mercantile Exchange (US market). On the NYMEX, the principle of "co-movement" between spot and forward prices seems to be respected. However, the autocorrelation functions of the first differences in the price changes show no randomness of price fluctuations for three segments out of four. Further, both the NYMEX and the IPE fail, with regard to the hypothesis that the forward price is an optimal predictor of the spot price. Consequently, unless we have an increase in the liquidity of spot markets and an increase in the relative share of NG spot trading, futures markets cannot be considered as efficient. [source]