Séminaire FIME – MIMO : Edouard Jaeck (U. Paris Dauphine) – The financialization of the term structure of risk premia in commodity markets

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Séminaire FIME – MIMO : Edouard Jaeck (U. Paris Dauphine) – The financialization of the term structure of risk premia in commodity markets

3 février

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In this paper, I examine how financialization affects the term structure of risk premia by using an equilibrium model for commodity futures markets. I define financialization as the entry of cross-asset investors, who are exposed to a commodity risk, into a commodity market. Qualitatively, the model shows that the financialization decreases the segmentation between commodity markets and the stock market. It also shows that speculators and investors both provide and consume liquidity and that the investment pressure from investors creates new risk premia. Further the model shows that financialization affects the entire term structure of risk premia. Quantitatively, these effects depend on the physical characteristics of the commodity market under study.

 

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Date :
3 février