An Analysis of the Fish Pool Market in the Context of Schwartz' (1997) Multifactor Model with Stochastic Convenience Yield

37 Pages Posted: 28 Aug 2012 Last revised: 13 Mar 2015

See all articles by Christian-Oliver Ewald

Christian-Oliver Ewald

University of Glasgow; Høgskole i Innlandet

Roy Nawar

University of Sydney

Ruolan Ouyang

University of Glasgow - Adam Smith Business School

Tak-Kuen Siu

Macquarie University, Macquarie Business School

Date Written: March 12, 2015

Abstract

Using the popular Schwartz 97 two-factor approach, we study future contracts written on fresh farmed salmon, which have been actively traded at the Fish Pool Market in Norway since 2006. This approach features a stochastic convenience yield for the salmon spot price. We connect this approach with the classical literature on fish-farming and aquaculture using first principles, starting by modeling the aggregate salmon farming production process and modeling the demand using a Cobb-Douglas utility function for a representative consumer. The model is estimated by means of Kalman filtering, using a rich data set of contracts with different maturities traded at Fish Pool between 12/06/2006 and 22/03/2012. The results are then discussed in the context of other commodity markets, specifically live cattle which acts as a substitute.

Keywords: Futures, Commodities, Aquaculture, Fisheries Economics, Renewable Resources, Risk Management

JEL Classification: G13, Q20, Q22

Suggested Citation

Ewald, Christian-Oliver and Nawar, Roy and Ouyang, Ruolan and Siu, Tak-Kuen, An Analysis of the Fish Pool Market in the Context of Schwartz' (1997) Multifactor Model with Stochastic Convenience Yield (March 12, 2015). Available at SSRN: https://ssrn.com/abstract=2136965 or http://dx.doi.org/10.2139/ssrn.2136965

Christian-Oliver Ewald (Contact Author)

University of Glasgow ( email )

Adam Smith Building
Glasgow, Scotland G12 8RT
United Kingdom

Høgskole i Innlandet ( email )

Lillehammer, 2624
Norway

Roy Nawar

University of Sydney ( email )

University of Sydney
Sydney, NSW 2006
Australia

Ruolan Ouyang

University of Glasgow - Adam Smith Business School ( email )

Glasgow, Scotland
United Kingdom

Tak-Kuen Siu

Macquarie University, Macquarie Business School

New South Wales 2109
Australia

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