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Commodities, Volume 3, Issue 3 (September 2024) – 6 articles

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21 pages, 2416 KiB  
Article
The Efficiency of China’s Carbon Trading Schemes: A Tale of Seven Pilot Markets
by Yigang Wei, Yan Li, Julien Chevallier and Michal Wojewodzki
Commodities 2024, 3(3), 355-375; https://doi.org/10.3390/commodities3030020 - 29 Aug 2024
Viewed by 335
Abstract
This study evaluates the efficiency of China’s seven emission trading schemes (ETS) piloted in 2013. We evaluate seven pilots’ overall technical and scale efficiencies and temporal dynamics during 2014–2023. We use a bootstrap correction data envelopment analysis (bootstrap-DEA), which guarantees a more accurate [...] Read more.
This study evaluates the efficiency of China’s seven emission trading schemes (ETS) piloted in 2013. We evaluate seven pilots’ overall technical and scale efficiencies and temporal dynamics during 2014–2023. We use a bootstrap correction data envelopment analysis (bootstrap-DEA), which guarantees a more accurate efficiency estimation than the traditional DEA model. The results show that the average overall (pure technical) efficiency of the seven pilot markets increased from 0.612 (0.844) in 2014 to 0.898 (0.990) in 2023. Furthermore, we document that seven ETS pilots differ remarkably in efficiency and transaction price, whilst all have shortages. Specifically, the small-scale market transaction is the main constraint effect on the average scale efficiency of the ETS. This study provides concrete recommendations for policy makers to consummate institutional designs to improve ETS efficiency. Full article
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21 pages, 701 KiB  
Article
Time-Varying Deterministic Volatility Model for Options on Wheat Futures
by Marco Haase and Jacqueline Henn
Commodities 2024, 3(3), 334-354; https://doi.org/10.3390/commodities3030019 - 23 Aug 2024
Viewed by 349
Abstract
This study introduces a robust model that captures wheat futures’ volatility dynamics, influenced by seasonality, time to maturity, and storage dynamics, with minimal calibratable parameters. Our approach reduces error-proneness and enhances plausibility checks, offering a reliable alternative to models that are difficult to [...] Read more.
This study introduces a robust model that captures wheat futures’ volatility dynamics, influenced by seasonality, time to maturity, and storage dynamics, with minimal calibratable parameters. Our approach reduces error-proneness and enhances plausibility checks, offering a reliable alternative to models that are difficult to calibrate. Transferring estimated parameters from liquid to illiquid markets is feasible, which is challenging for models with numerous parameters. This is of practical importance as it improves the modeling of volatility in illiquid markets, where price discovery is less efficient. In liquid markets, on the other hand, where speculative activity is high, we find that implied volatility is usually the best measure. Additionally, the introduced volatility model is suitable for pricing options on wheat futures as a risk-neutral measure. Full article
(This article belongs to the Special Issue Financialization of Commodities Markets)
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20 pages, 1512 KiB  
Article
Navigating the Challenges of Commodity Traps and Platform Economies: An Assessment in the Context of the Northern Black Forest Region and Future Directions
by Bernhard Koelmel, Leon Fischer, Emilia Juraschek, Levi Peuker, Noah Stemmler, Anton Vielsack, Rebecca Bulander, Henning Hinderer, Katharina Kilian-Yasin, Tanja Brugger, Ansgar Kühn and Tanja Brysch
Commodities 2024, 3(3), 314-333; https://doi.org/10.3390/commodities3030018 - 27 Jul 2024
Viewed by 496
Abstract
The transition to battery electric vehicles (BEVs) poses significant challenges for automotive suppliers, particularly in the Northern Black Forest Region, Germany’s largest industrial area. This study examines the risk of falling into the commodity trap and the impact of platform economics on these [...] Read more.
The transition to battery electric vehicles (BEVs) poses significant challenges for automotive suppliers, particularly in the Northern Black Forest Region, Germany’s largest industrial area. This study examines the risk of falling into the commodity trap and the impact of platform economics on these suppliers. A VUCA (volatility, uncertainty, complexity, ambiguity) analysis is used to assess the consequences of the open platform approach promoted by the Mobility in Harmony (MIH) Consortium. The methodology is based on a comprehensive literature review on commodity traps and platform economies, as well as an analysis of the MIH Consortium’s strategies for standardizing BEV components. The results show that while the MIH Consortium’s modularization and standardization efforts can reduce costs and facilitate mass production, they also intensify competition and limit differentiation, threatening the profit margins of smaller suppliers. The study highlights the importance of strategic positioning and innovation to counter these risks. It concludes with recommendations on how automotive suppliers can adapt to the evolving environment and be agile in responding to new technological standards and market dynamics. Full article
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33 pages, 1879 KiB  
Article
Sector Formula for Approximation of Spread Option Value & Greeks and Its Applications
by Roza Galeeva and Zi Wang
Commodities 2024, 3(3), 281-313; https://doi.org/10.3390/commodities3030017 - 26 Jul 2024
Viewed by 599
Abstract
The goal of this paper is to derive closed-form approximation formulas for the spread option value and Greeks by using double integration and investigating the exercise boundary. We have found that the straight-line approximation suggested in previous research does not perform well for [...] Read more.
The goal of this paper is to derive closed-form approximation formulas for the spread option value and Greeks by using double integration and investigating the exercise boundary. We have found that the straight-line approximation suggested in previous research does not perform well for curved exercise boundaries. We propose a novel approach: to integrate in a sector and find a closed-form formula expressed in terms of the bivariate normal CDF. We call it the sector formula. Numerical tests show the good accuracy of our sector formula. We demonstrate applications of the formula to the market data of calendar spread options for three major commodities, WTI, Natural Gas, and Corn, listed on the CME site as of May, April, and June 2024. Full article
(This article belongs to the Topic Energy Market and Energy Finance)
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27 pages, 1576 KiB  
Article
Electricity GANs: Generative Adversarial Networks for Electricity Price Scenario Generation
by Bilgi Yilmaz, Christian Laudagé, Ralf Korn and Sascha Desmettre
Commodities 2024, 3(3), 254-280; https://doi.org/10.3390/commodities3030016 - 8 Jul 2024
Cited by 1 | Viewed by 537
Abstract
The dynamic structure of electricity markets, where uncertainties abound due to, e.g., demand variations and renewable energy intermittency, poses challenges for market participants. We propose generative adversarial networks (GANs) to generate synthetic electricity price data. This approach aims to provide comprehensive data that [...] Read more.
The dynamic structure of electricity markets, where uncertainties abound due to, e.g., demand variations and renewable energy intermittency, poses challenges for market participants. We propose generative adversarial networks (GANs) to generate synthetic electricity price data. This approach aims to provide comprehensive data that accurately reflect the complexities of the actual electricity market by capturing its distribution. Consequently, we would like to equip market participants with a versatile tool for successfully dealing with strategy testing, risk model validation, and decision-making enhancement. Access to high-quality synthetic electricity price data is instrumental in cultivating a resilient and adaptive marketplace, ultimately contributing to a more knowledgeable and prepared electricity market community. In order to assess the performance of various types of GANs, we performed a numerical study on Turkey’s intraday electricity market weighted average price (IDM-WAP). As a key finding, we show that GANs can effectively generate realistic synthetic electricity prices. Furthermore, we reveal that the use of complex variants of GAN algorithms does not lead to a significant improvement in synthetic data quality. However, it requires a notable increase in computational costs. Full article
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6 pages, 548 KiB  
Editorial
Rising Tides: Election Cycles, Economic Uncertainty, Equity and Commodity Markets Fluctuations
by Julien Chevallier
Commodities 2024, 3(3), 248-253; https://doi.org/10.3390/commodities3030015 - 30 Jun 2024
Viewed by 455
Abstract
Election cycles have been called for in many countries for 2024, including [...] Full article
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