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Probability and Computational Finance Seminar
Antonis Papapantoleon
Technical University Berlin
Title: An equilibrium model for commodity spot and forward prices

Abstract: We consider a market model that consists of financial investors, producers and consumers of a (consumption) commodity. Producers trade the forward contracts to hedge the commodity price uncertainty, while speculators invest in these contracts to diversify their portfolios. It is argued that the commodity equilibrium prices are the ones that clear out the market of spot and forward contracts. Assuming that producers and speculators are utility maximizers and that the consumers' demand and the exogenously priced financial market are driven by Lévy processes, we provide explicit expressions for the equilibrium prices and analyze their dependence on the model parameters. The model is then extended to the multiperiod setting. This is joint work with M. Anthropelos and M. Kupper.

Date: Monday, September 23, 2013
Time: 5:00 pm
Location: Wean Hall 6423
Submitted by:  Steve Shreve