A commodity market

In this paper, we propose a simple model of commodity markets, which offers a unified theoretical framework for the analysis of price relationships: it comprises the hedging pressure theory as well as the storage theory, so that hedging and informational functions performed by the derivative market can be simultaneously assessed. We study the simultaneous equilibrium in the physical and futures markets for the commodity and demonstrate the existence and the unicity of this equilibrium. Then, we give an extensive analysis of the equilibrium, in several settings: with or without storage, with or without futures markets. Finally, we perform a welfare analysis of the various markets organizations encountered or proposed by regulators.