Commodity Futures Pricing: Testing for the Nonzero Premium and Predicting the Future Spot Price

Open Access
Dolente, Christine Marie
Area of Honors:
Bachelor of Science
Document Type:
Thesis Supervisors:
  • James Alan Miles, Thesis Supervisor
  • James Alan Miles, Honors Advisor
  • Timothy T Simin, Faculty Reader
  • commodities
  • futures contracts
  • pricing theory
Conventionally, commodity futures contract prices are calculated as a function of the spot price, interest rate, storage cost, and convenience yield. An alternative pricing theory of commodity futures says that the futures price is broken down into two components: the expected risk premium and the expected future spot price. This thesis tests the theory to determine if commodity futures prices can be used to find the nonzero risk premium and the future spot price.