Futures basis, inventory and commodity price volatility: an empirical analysis

We employ a large dataset of physical inventory data on 21 different commodities for the period 1993–2011 to empirically analyze the behavior of commodity prices and their volatility as predicted by the theory of storage. We examine two main issues. First, we analyze the relationship between inventory and the shape of the forward curve. Low (high) inventory is associated with forward curves in backwardation (contango), as the theory of storage predicts. Second, we show that price volatility is a decreasing function of inventory for the majority of commodities in our sample. This effect is more pronounced in backwardated markets. Our findings are robust with respect to alternative inventory measures and over the recent commodity price boom.

Colonisation of the chicken caecum by afimbriate and aflagellate derivatives of Salmonella enterica serotype Enteritidis

A semi-quantitative cloacal-swab method was used as an indirect measure of caecal colonisation of one-day old and five-day old chicks after oral dosing with wild-type Salmonella enterica serovar Enteritidis PT4 and,genetically defined isogenic derivatives lacking the ability to elaborate flagella or fimbriae. Birds of both ages were readily and persistently colonised by all strains although there war a decline in shedding by the older birds after about 21 days. There were no significant differences in shedding of wild-type or mutants in single-dose experiments. In competition experiments, in which five-day old birds were dosed orally with wild-type and mutants together, shedding of non-motile derivatives was significantly lower than wild-type, At 35 days post infection, birds were sacrificed and direct counts of mutants and wild-type from each caecum were determined. Whilst there appeared to be poor correlation between direct counts and the indirect swab method, the overall trends shown by these methods of assessment indicated that flagella and not fimbriae were important in caecal colonisation in these models. Crown Copyright (C) 1999 Published by Elsevier Science B.V.

Transfers, contracts and regulation: a new institutional economics perspective on the changing provision of social housing in Britain

Social housing policy in the UK mirrors wider processes Associated with shifts in broad welfare regimes. Social housing has moved from dominance by state housing provision to the funding of new investment through voluntary sector housing associations to what is now a greater focus on the regulation and private financing of these not-for-profit bodies. If these trends run their course, we are likely to see a range of not-for-profit bodies providing non-market housing in a highly regulated quasi-market. This paper examines these issues through the lens of new institutional economics, which it is believed can provide important insights into the fundamental contractual and regulatory relationships that are coming to dominate social housing from the perspective of the key actors in the sector (not-for-profit housing organisations, their tenants, private lenders and the regulatory state). The paper draws on evidence recently collected from a study evaluating more than 100 stock transfer organisations that inherited ex-public housing in Scotland, including 12 detailed case studies. The paper concludes that social housing stakeholders need to be aware of the risks (and their management) faced across the sector and that the state needs to have clear objectives for social housing and coherent policy instruments to achieve those ends.

Seasonality and the valuation of commodity options

Price movements in many commodity markets exhibit significant seasonal patterns. However, given an observed futures price, a deterministic seasonal component at the price level is not relevant for the pricing of commodity options. In contrast, this is not true for the seasonal pattern observed in the volatility of the commodity price. Analyzing an extensive sample of soybean, corn, heating oil and natural gas options, we find that seasonality in volatility is an important aspect to consider when valuing these contracts. The inclusion of an appropriate seasonality adjustment significantly reduces pricing errors in these markets and yields more improvement in valuation accuracy than increasing the number of stochastic factors.

Commodity futures prices: more evidence on forecast power, risk premia and the theory of storage

In this paper, we examine the temporal stability of the evidence for two commodity futures pricing theories. We investigate whether the forecast power of commodity futures can be attributed to the extent to which they exhibit seasonality and we also consider whether there are time varying parameters or structural breaks in these pricing relationships. Compared to previous studies, we find stronger evidence of seasonality in the basis, which supports the theory of storage. The power of the basis to forecast subsequent price changes is also strengthened, while results on the presence of a risk premium are inconclusive. In addition, we show that the forecasting power of commodity futures cannot be attributed to the extent to which they exhibit seasonality. We find that in most cases where structural breaks occur, only changes in the intercepts and not the slopes are detected, illustrating that the forecast power of the basis is stable over different economic environments.

Occupational futures? Divesting real estate and corporate PFI

Property ownership can tie up large amounts of capital and management energy that business could employ more productively elsewhere. Competitive pressures, accounting changes and increasingly sophisticated occupier requirements are building demand for new and innovative ways to satisfy corporate occupation needs. The investment climate is also changing. Falling interest rates and falling inflation can be expected to undermine returns from the traditional FRI lease. In future, investment returns will be more dependent on active and innovative management geared to the needs of occupiers on whom income depends. Occupier and investor interests, therefore, look set to coincide, but unlocking the potential for both parties will depend on developing new finance and investment vehicles that align their respective needs. In the UK, examples include PFI in the public sector and off-balance sheet financing in the private sector. In the USA, “synthetic lease” structures have also become popular. Growing investment market experience in assessing risks and returns suggests scope for further innovative arrangements in the corporate sector. But how can such arrangements be structured? What are the risks, drivers and barriers?

Retrofit city futures: visions for urban sustainability

This report (which is part of the EPSRC Retrofit 2050 project) sets out three contrasting long term (2050) visions for retrofit city-regional futures, developed through an in-depth participatory backcasting and foresight process. These contextual scenarios are intended as a tool which can be adapted and used by a wide variety of stakeholders and organisations to stimulate discussion and inform future policy and long-term planning.

City futures: exploring urban retrofit and sustainable transitions

Cities are responsible for up to 70% of global carbon emissions and 75% of global energy consumption. By 2050 it is estimated that 70% of the world's population will live in cities. The critical challenge for contemporary urbanism, therefore, is to understand how to develop the knowledge, capacity and capability for public agencies, the private sector and multiple users in city-regions (i.e. the city and its wider hinterland) to re-engineer systemically their built environment and urban infrastructure in response to climate change and resource constraints. To inform transitions to urban sustainability, key stakeholders' perceptions were sought though a participatory backcasting and scenario foresight process in order to illuminate challenging but realistic socio-technical scenarios for the systemic retrofit of core UK city-regions. The challenge of conceptualizing complex urban transitions is explored across multiple socio-technical ‘regimes’ (housing, non-domestic buildings, urban infrastructure), scales (building, neighbourhood, city-region), and domains (energy, water, use of resources) within a participatory process. The development of three archetypal ‘guiding visions’ of retrofit city-regional futures developed through this process are discussed, along with the contribution that such foresight processes might play in ‘opening up’ the governance and strategic navigation of urban sustainability.

Sparse polynomial approximation in positive order Sobolev spaces with bounded mixed derivatives and applications to elliptic problems with random loading

In the present paper we study the approximation of functions with bounded mixed derivatives by sparse tensor product polynomials in positive order tensor product Sobolev spaces. We introduce a new sparse polynomial approximation operator which exhibits optimal convergence properties in L2 and tensorized View the MathML source simultaneously on a standard k-dimensional cube. In the special case k=2 the suggested approximation operator is also optimal in L2 and tensorized H1 (without essential boundary conditions). This allows to construct an optimal sparse p-version FEM with sparse piecewise continuous polynomial splines, reducing the number of unknowns from O(p2), needed for the full tensor product computation, to View the MathML source, required for the suggested sparse technique, preserving the same optimal convergence rate in terms of p. We apply this result to an elliptic differential equation and an elliptic integral equation with random loading and compute the covariances of the solutions with View the MathML source unknowns. Several numerical examples support the theoretical estimates.

Construction contracts: law and management. 4th edition

This is a fully revised edition of the UK’s leading textbook on the law governing construction contracts and the management and administration of those contracts. Although the legal principles involved are an aspect of general contract law, the practical and commercial complexities of the construction industry have increasingly made this a specialist area. This new edition has been brought up to date with recent cases and developments in the law as it stands at March 2007. The basic approach of the book has been retained. Rather than provide a commentary on standard-form contracts, our approach is to introduce the general principles that underlie contracts in construction, illustrating them by reference to the most important standard forms currently in use. Some of the common standard-form contracts have been revised since the previous edition, and the text has been revised to take account of these changes. Practitioners (consultants, builders, clients and lawyers) will find this an extremely useful source of reference, providing in-depth explanations for all of the features found in contemporary construction contracts, with reasons. A unique feature of this book is the way that it brings together the relevant principles of law with the practical issues arising in construction cases. It is a key text for construction undergraduates and postgraduates as well as for those taking the RIBA Part III and CIOB Part II examinations.

A trading strategy based on the lead–lag relationship between the spot index and futures contract for the FTSE 100

This paper examines the lead–lag relationship between the FTSE 100 index and index futures price employing a number of time series models. Using 10-min observations from June 1996–1997, it is found that lagged changes in the futures price can help to predict changes in the spot price. The best forecasting model is of the error correction type, allowing for the theoretical difference between spot and futures prices according to the cost of carry relationship. This predictive ability is in turn utilised to derive a trading strategy which is tested under real-world conditions to search for systematic profitable trading opportunities. It is revealed that although the model forecasts produce significantly higher returns than a passive benchmark, the model was unable to outperform the benchmark after allowing for transaction costs.

An alternative approach to investigating lead-lag relationships between stock and stock index futures markets

In the absence of market frictions, the cost-of-carry model of stock index futures pricing predicts that returns on the underlying stock index and the associated stock index futures contract will be perfectly contemporaneously correlated. Evidence suggests, however, that this prediction is violated with clear evidence that the stock index futures market leads the stock market. It is argued that traditional tests, which assume that the underlying data generating process is constant, might be prone to overstate the lead-lag relationship. Using a new test for lead-lag relationships based on cross correlations and cross bicorrelations it is found that, contrary to results from using the traditional methodology, periods where the futures market leads the cash market are few and far between and when any lead-lag relationship is detected, it does not last long. Overall, the results are consistent with the prediction of the standard cost-of-carry model and market efficiency.

Do long-short speculators destabilize commodity futures markets?

This paper contributes to the debate on the effects of the financialization of commodity futures markets by studying the conditional volatility of long–short commodity portfolios and their conditional correlations with traditional assets (stocks and bonds). Using several groups of trading strategies that hedge fund managers are known to implement, we show that long–short speculators do not cause changes in the volatilities of the portfolios they hold or changes in the conditional correlations between these portfolios and traditional assets. Thus calls for increased regulation of commodity money managers are, at this stage, premature. Additionally, long–short speculators can take comfort in knowing that their trades do not alter the risk and diversification properties of their portfolios.