The market for salmon futures: an empirical analysis of fish pool using the Schwartz multifactor model

Ewald, C.-O. , Nawar, R., Ouyang, R. and Siu, T. K. (2016) The market for salmon futures: an empirical analysis of fish pool using the Schwartz multifactor model. Quantitative Finance, 16(12), pp. 1823-1842. (doi:10.1080/14697688.2016.1211792)

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Abstract

Using the popular Schwartz 97 two-factor approach, we study future contracts written on fresh farmed salmon, which have been actively traded at the Fish Pool Market in Norway since 2006. This approach features a stochastic convenience yield for the salmon spot price. We connect this approach with the classical literature on fish-farming and aquaculture using first principles, starting by modeling the aggregate salmon farming production process and modeling the demand using a Cobb-Douglas utility function for a representative consumer. The model is estimated by means of Kalman filtering, using a rich data set of contracts with different maturities traded at Fish Pool between 12/06/2006 and 22/03/2012. The results are then discussed in the context of other commodity markets, specifically live cattle which acts as a substitute.

Item Type:Articles
Status:Published
Refereed:Yes
Glasgow Author(s) Enlighten ID:Ewald, Professor Christian and Ouyang, Miss Ruolan
Authors: Ewald, C.-O., Nawar, R., Ouyang, R., and Siu, T. K.
College/School:College of Social Sciences > Adam Smith Business School
College of Social Sciences > Adam Smith Business School > Economics
Journal Name:Quantitative Finance
Publisher:Taylor & Francis
ISSN:1469-7688
ISSN (Online):1469-7696
Published Online:14 September 2016
Copyright Holders:Copyright © 2016 Informa UK Limited, trading as Taylor and Francis Group
First Published:First published in Quantitative Finance 16(12): 1823-1842
Publisher Policy:Reproduced in accordance with the publisher copyright policy

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