Manipulation of commodity prices

This paper has shown, in a two-period model, the five conditions in which an informed speculator (henceforth informed) has to satisfy before he can successfully exploit the vulnerability of futures pricing in a highly rational and efficient market to mislead firms into buying mispriced forward contr...

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Main Authors: Oh, Boon Long, Wang, Yi Quan, Toh, Chao Zhang
Other Authors: Suman Banerjee
Format: Final Year Project
Language:English
Published: 2010
Subjects:
Online Access:http://hdl.handle.net/10356/33610
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Institution: Nanyang Technological University
Language: English
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spelling sg-ntu-dr.10356-336102023-05-19T06:16:12Z Manipulation of commodity prices Oh, Boon Long Wang, Yi Quan Toh, Chao Zhang Suman Banerjee Nanyang Business School DRNTU::Business This paper has shown, in a two-period model, the five conditions in which an informed speculator (henceforth informed) has to satisfy before he can successfully exploit the vulnerability of futures pricing in a highly rational and efficient market to mislead firms into buying mispriced forward contracts over-the-counter (owned by the informed). The five conditions are described as follows. First, the informed must have received either an uninformative or a medium signal about the future state of demand. Second, both informed and noise traders must submit a buy order in the Exchange, so that the futures price is artificially bided up. Third, the informed must set a level of strategic storage in the spot market, after the Exchange closes, such that the forward is priced slightly below the firms’ trigger prices. Fourth, this level of strategic storage must also allow firms to enjoy an expected net benefit of hedging. Last, the informed must be able to earn a positive manipulative profit from this level of storage. BUSINESS 2010-04-08T06:15:34Z 2010-04-08T06:15:34Z 2010 2010 Final Year Project (FYP) http://hdl.handle.net/10356/33610 en Nanyang Technological University 41 p. application/pdf
institution Nanyang Technological University
building NTU Library
continent Asia
country Singapore
Singapore
content_provider NTU Library
collection DR-NTU
language English
topic DRNTU::Business
spellingShingle DRNTU::Business
Oh, Boon Long
Wang, Yi Quan
Toh, Chao Zhang
Manipulation of commodity prices
description This paper has shown, in a two-period model, the five conditions in which an informed speculator (henceforth informed) has to satisfy before he can successfully exploit the vulnerability of futures pricing in a highly rational and efficient market to mislead firms into buying mispriced forward contracts over-the-counter (owned by the informed). The five conditions are described as follows. First, the informed must have received either an uninformative or a medium signal about the future state of demand. Second, both informed and noise traders must submit a buy order in the Exchange, so that the futures price is artificially bided up. Third, the informed must set a level of strategic storage in the spot market, after the Exchange closes, such that the forward is priced slightly below the firms’ trigger prices. Fourth, this level of strategic storage must also allow firms to enjoy an expected net benefit of hedging. Last, the informed must be able to earn a positive manipulative profit from this level of storage.
author2 Suman Banerjee
author_facet Suman Banerjee
Oh, Boon Long
Wang, Yi Quan
Toh, Chao Zhang
format Final Year Project
author Oh, Boon Long
Wang, Yi Quan
Toh, Chao Zhang
author_sort Oh, Boon Long
title Manipulation of commodity prices
title_short Manipulation of commodity prices
title_full Manipulation of commodity prices
title_fullStr Manipulation of commodity prices
title_full_unstemmed Manipulation of commodity prices
title_sort manipulation of commodity prices
publishDate 2010
url http://hdl.handle.net/10356/33610
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