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    Seasonality in cocoa spot and forward markets: empirical evidence

    Sarfo, S. and Geman, Hélyette (2012) Seasonality in cocoa spot and forward markets: empirical evidence. Journal of Agricultural Extension and Rural Development 4 (8), pp. 164-180. ISSN 2141-2170.

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    Abstract

    This paper first describes the main features of supply and demand in cocoa spot markets. A state- variable model is proposed to describe the random evolution of cocoa forward curves over time, which essentially adapts to agricultural commodities, introduced by Borovkova and Geman (2006) for energy. In contrast to most of the literature on the subject, the first state variable is not the spot price, as it combines seasonal and stochastic features and may not be observable, instead, the average value of all liquid futures contracts is a quantity devoid of seasonality and conveys a robust representation of the forward curve level. The second state variable is a quantity analogous to the stochastic convenience yield, which accounts for the random changes in the shape of the forward curve. We conduct estimation procedures for the cocoa market over the period of 1980 to 2009 and exhibit an interesting result on cocoa seasonality as well as an extension of the Samuelson effect.

    Metadata

    Item Type: Article
    Keyword(s) / Subject(s): cocoa spot markets, forward curve stochastic modeling, future curve average value
    School: Birkbeck Schools and Departments > School of Business, Economics & Informatics > Economics, Mathematics and Statistics
    Research Centre: Commodities Finance Centre
    Depositing User: Sarah Hall
    Date Deposited: 14 Apr 2014 12:45
    Last Modified: 26 Jul 2019 18:28
    URI: http://eprints.bbk.ac.uk/id/eprint/9575

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