JAECK Edouard

We give new insights into the dynamic behavior of commodity prices with an infinite horizon rational expectations equilibrium model for spot and futures commodity prices. Numerical simulations of the model emphasize the heterogeneity that exists in the behavior of commodity prices by showing the link between the physical characteristics of a market and some stylized facts of commodity futures prices. They show the impact of storage costs on both the variability of the basis and on the Samuelson effect. Finally, the simulations of the model show that an increase in the speculative activity on commodity futures markets has an overall positive effect on risk premia. However, not all of the agents benefit from it.

Commodity futures markets have a long history. However, since the beginning of the 21st century, both the financialization process and the development of futures markets on a non-storable commodity (the electricity) have shake up their functioning.The three essays of this thesis study theoretically and empirically commodity futures markets in different situations of functioning.The first essay is an empirical study that shows that the Samuelson effect exists on electricity derivative markets. As a consequence, it shows that storage is not a necessary condition for such an effect.The second essay is a model that shows how the dynamic behavior of storable commodity prices on a segmented futures market is affected by its physical characteristics, and more precisely by the cost of storage.Further, the third essay is a model that shows that financialization changes the risk sharing function of commodity futures markets, whatever the concerned maturity.

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Commodity futures markets have existed for centuries. However, since the beginning of the 21st century, the parallel development of financialization and futures markets on a non-storable commodity (electricity) has disrupted their functioning.The three essays in this thesis study theoretically and empirically the commodity futures markets under different operating conditions.The first essay is an empirical study that shows the existence of the Samuelson effect on electricity futures markets. The second essay is a model that shows how the dynamic price behavior of a storable commodity in a futures market segmented from the rest of the economy is affected by its physical characteristics, and in particular by the cost of storage.Finally, the third essay is a model that shows that financialization modifies the risk-sharing function of commodity futures markets, regardless of the maturity involved.

This article proposes an empirical study of the Samuelson effect in electricity markets. Our motivations are twofold. First, although the literature largely assesses the decreasing pattern in the volatilities along the price curve in commodity markets, it has not extensively tested the presence of such a dynamic feature in electricity prices. Second, the analysis of a non-storable commodity enriches the literature on the behavior of commodity prices. Indeed, it has been sometimes asserted that the Samuelson effect results from the presence of inventories. We examine the four most important electricity futures markets worldwide for the period from 2008 to 2014: the German, Nordic, Australian, and US markets. We also use the American crude oil market as a benchmark for a storable commodity negotiated on a mature futures market. Our analysis has two steps: i) in addition to the traditional tests, we propose and test a new empirical implication of the Samuelson effect: price shocks should spread from the physical market to the paper market, and not the reverse. ii) based on the concept of “indirect storability”, we investigate the link between the Samuelson effect and the storability of the commodity. We find evidence of a Samuelson effect in all of the electricity markets and show that storage is not a necessary condition for such an effect to appear. These results should be taken into account for the understanding of the dynamic behavior of commodity prices, for the valuation of electricity assets, and for hedging operations.

It is common to assert, in the literature on commodity derivative markets, that the behavior of futures prices is characterized by the "Samuelson Hypothesis": there is a decreasing pattern of volatilities along the prices curve. Despite some debates about statistical measurements, this hypothesis has found a large empirical support. Yet, to the best of our knowledge, one of its empirical implications has never been proposed nor tested: if Samuelson is right, then prices shocks emerging in the physical market should propagate in the direction of the paper market. The first contribution of this paper is to fill this gap. Second contribution: up to now, the validation of the Samuelson hypothesis has never been considered in the case of electricity futures markets. Yet the non storability of this commodity raises interesting questions. Is the Samuelson hypothesis still valid in such a context? What does this commodity learn us about the role of inventories in the prices’ volatilities? In order to answer these questions, we examine the prices behavior of the four most important electricity futures markets, worldwide, from 2009 to 2013: the German market, the NordPool, the Australian market and the PJM Western Hub in the USA. We use the American crude oil market as a benchmark for a storable commodity negotiated on a futures market and as an example of a mature market. We find evidence, for all markets, of a maturity impact. Finally, we rely on the recent notion of indirect storability as a first direction to explain such conclusion.

It is common to assert, in the literature on commodity derivative markets, that the behavior of futures prices is characterized by the "Samuelson Hypothesis": there is a decreasing pattern of volatilities along the prices curve. Despite some debates about statistical measurements, this hypothesis has found a large empirical support. Yet, to the best of our knowledge, one of its empirical implications has never been proposed nor tested: if Samuelson is right, then prices shocks emerging in the physical market should propagate in the direction of the paper market. The first contribution of this paper is to fill this gap. Second contribution: up to now, the validation of the Samuelson hypothesis has never been considered in the case of electricity futures markets. Yet the non storability of this commodity raises interesting questions. Is the Samuelson hypothesis still valid in such a context? What does this commodity learn us about the role of inventories in the prices’ volatilities? In order to answer these questions, we examine the prices behavior of the four most important electricity futures markets, worldwide, from 2009 to 2013: the German market, the NordPool, the Australian market and the PJM Western Hub in the USA. We use the American crude oil market as a benchmark for a storable commodity negotiated on a futures market and as an example of a mature market. We find evidence, for all markets, of a maturity impact. Finally, we rely on the recent notion of indirect storability as a first direction to explain such conclusion.

After having been considered as a public good during decades, electricity is now regarded as a tradable commodity in most developed countries. Since they were launched twenty years ago, electricity derivative markets exhibit sustained rises in their transaction volumes. Even if these markets are still recent, there is now enough information to understand precisely how they function and to compare them with other markets for traditional commodities. Moreover, it is common to assert, in the literature on commodity derivative markets, that the behavior of futures prices is characterized by the "Samuelson Hypothesis" (Samuelson, 1965), i.e. by the presence of a decreasing pattern of volatilities along the prices curve. A deeper knowledge of the Samuelson hypothesis is required for industrial and financial agents as well as for regulatory authorities. Traditional hedgers on commodity markets are producers, industrial processors and trading companies. They use the futures markets to hedge their physical exposure to the underlying asset. Taking into account the Samuelson effect might impact the choice of their hedging horizon. Moreover, volatility is one of the most important parameters in the pricing of options. Whenever the framework of a constant volatility, as in the Black-Scholes model, is relaxed, the Samuelson effect must be taken into account. Finally, the maturity impact concerns clearing houses and regulatory authorities when setting margin requirements and thinking about risk exposures. Margin requirements, which protect against counter-party credit default risk, are function of the risk of the underlying contract, for which a proxy could be the volatility. Despite some debates about statistical measurements, this hypothesis has found a large empirical support. Yet, to the best of our knowledge, one of its empirical implications has never been proposed nor tested: if Samuelson is right, then prices shocks emerging in the physical market should propagate in the direction of the paper market. The first contribution of this paper is to fill this gap. Second contribution: up to now, the validation of the Samuelson hypothesis has never been considered in the case of electricity futures markets. Yet the non storability of this commodity raises interesting questions.