Price distortions in the commodity futures markets
Name
836717427-MIT.pdf
Description
Full printable version
Size
10.61 MB
Format
Adobe PDF
Checksum (MD5)
b60cabb186169a4eccecc1b0359222f2
Author(s)
Helfrich, Devin B
Advisor(s)
John E. Parsons.
Date Issued
2012
Publisher
Massachusetts Institute of Technology
Abstract
Speculation is not monolithic; it comes in many forms. A certain level of speculation is required for commodity futures markets to function. On the other hand, certain types of trading activities by speculators may damage a market's price discovery function and in turn its hedging function. However, there is great disagreement as to which types of speculation can distort commodity futures prices and the mechanisms for how a price distortion may occur. This thesis advances three distinct categories of speculative activities alleged to distort commodity prices and reviews evidence for each. Those three categories are: corner and squeeze manipulations, nonfundamental futures demand, and large speculative demand. Case studies are presented for each of the three categories. In addition, the effectiveness of speculative position limits in decreasing the occurrence of each category is analyzed. A question that arises, but is left unanswered, is whether the marginal benefits outweigh the possible costs of speculation once speculation rises above certain levels required for price discovery and hedging.
Description
Thesis (S.M. in Technology and Policy)--Massachusetts Institute of Technology, Engineering Systems Division, 2012.
Cataloged from PDF version of thesis. Page 91 blank.
Includes bibliographical references (p. 87-90).
Subjects
Engineering Systems Division.
Technology and Policy Program.
MIT Department
Massachusetts Institute of Technology. Engineering Systems Division
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