We model the impact of supply and demand on risk premiums in electricity futures, using daily data for 2003-2014. The model provides a satisfactory fit and allows for unspanned economic risk not embedded in the futures price. The spot risk premium and forward bias implied by the model are on...

This article uses a Pirrong-Jermakyan framework to value options on electricity, including daily strike, monthly strike, and spark spread options. This framework posits that power prices depend on two state variables - load and fuel prices. Although variations in load explain a large fraction of...

Momentum has been examined extensively in equity markets, but little studied outside them. I document the existence of momentum and reversals in futures markets including commodity and financial futures contracts traded in the US and overseas. Futures momentum portfolios earn positive average...

Computerized trading has made great inroads in equity and derivatives markets, especially in Europe and Asia, but open outcry markets remain dominant in the United States despite predictions of the imminent demise of floor trading. This article identifes three factors that influence the relative...

The costs and benefits of third markets for financial instruments are widely debated. Contrary to claims that it is inefficient for third markets to free ride off of a primary exchange's price discovery, this article presents a model that implies that (1) third markets actually improve welfare,...

Credit derivatives have received intense scrutiny -- and criticism -- as a major contributor to the ongoing financial crisis. In response, regulators have proposed requiring the formation of a central clearinghouse to share default risk on these contracts. A comparative economic analysis of the...

Commodity price spikes are often accompanied by allegations that speculative excess has caused prices to depart dramatically from levels justified by fundamentals. Since prices guide real resource allocations, distortions in prices should lead to distortions in real variables, such as...