Expected Spot Prices and the Dynamics of Commodity Risk Premia

@inproceedings{Bianchi2017ExpectedSP,
  title={Expected Spot Prices and the Dynamics of Commodity Risk Premia},
  author={Daniele Bianchi and Jacopo Piana},
  year={2017}
}
We analyse a novel time series of investors’ expectations on future commodity spot prices, and show that a model with adaptive learning can replicate investors' forecasts. We use this framework to back out the dynamics of the (ex-ante) risk premia for different commodities and maturities, and provide evidence that commodity risk premia are time-varying and their dynamics is predominantly due to the changing nature of risk sharing and appetite, as proxied by open interest, hedging pressure and… CONTINUE READING

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