Financial Markets for Commodities

7 A Very Selective Review of Modern Literature in Economics

There is abundant literature on economics and it would be impossible to present a brief summary of this. We have thus chosen to present three studies that appeared extremely original and to study crucial points on derivative markets: anticipation by agents, the institutional organization of markets and the stabilizing or destabilizing effect of derivative markets on physical markets. We will retain the notations used in the original publications to make it easier for any reader who may wish to refer to the original work.

7.1. The price dynamics for cash prices and future prices – a theoretical approach

In this section, we present certain elements from [GUE 93]. At a conceptual level, this study is interesting as it emphasizes the anticipation of agents first as concerns cash markets and then as concerns hedging on the futures market. Guesnerie and Rochet aimed to chiefly study the stabilizing or destabilizing effect of futures markets on cash markets. The results they obtained are interesting, but it is the conceptual framework that we thought was more important: this original article attributed great importance to the processes of mental coordination through which players coordinate their actions. The authors were, in particular, interested in what they called the “Eductive stability of the rational expectations equilibrium”.

The broad outline of these models is as follows: economics considers two dates (t = 1,2) ...