Summer 2019 Archives

November 26, 2021 by

Digital Assets: The Era of Tokenized Securities

By Brian Leiberman, Chief Operating Officer and Head of Global Capital at MLG Blockchain (Canada) and Dave Mirynech, Director of Research and Blockchain Consultant at MLG Blockchain (Canada)

This article argues that digital assets (a) stand as an effective fundraising mechanism, (b) enable access to global investor pools, and (c) unlock liquidity in many assets. The article recommends that market participants stay abreast of advances in this arena over the next few years because of their potentially large impact on capital markets in general and commodity investing in particular.

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November 26, 2021 by

Three Possible Ways that Blockchain Technology Could Disrupt the Commodities Industry

By Alex Cohen, Co-Founder and Managing Director, New Beacon Partners and Luis Quintero, Co-Founder and Managing Director, New Beacon Partners

This paper discusses three potential applications of blockchain technology, namely how the technology could be incorporated into (a) the current United States crop insurance industry, (b) supply chain logistics to help increase food safety and minimize the cost of food recalls, and (c) a new mechanism through which investors can gain direct exposure to commodities and commodity producing assets.

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November 26, 2021 by

Blockchain and Financial Market Innovation

By Rebecca Lewis, Former Analyst, Federal Reserve Bank of Chicago; John McPartland, Senior Policy Advisor, Federal Reserve Bank of Chicago; and Rajeev Ranjan, Senior Vice President, Citi and Former Policy Advisor, Federal Reserve Bank of Chicago

Blockchain technology is likely to be a key source of future financial market innovation. It allows for the creation of immutable records of transactions accessible by all participants in a network. This article provides a brief overview of what blockchain technology is, how it works, and some potential applications and challenges.

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November 26, 2021 by

Interview with Leo Melamed, Chairman Emeritus of the CME Group and Founder of Financial Futures

Interview by Hilary Till, Contributing Editor, Global Commodities Applied Research Digest

The GCARD’s interview with CME Group Chairman Emeritus Leo Melamed focuses on technological change in the financial markets. During the interview, the Chairman Emeritus discusses the wrenching move from floor trading to electronic trading, and he also provides his thoughts on the potential for disruptive change due to blockchain.

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November 26, 2021 by

Economics Gone Astray

By Tina Marie Reine, Commodity Markets Consultant

The authors of Economics Gone Astray make the compelling case that economists need to take their simplifying assumptions more seriously, to embrace statistical techniques that can track dynamic markets with time-varying parameters, and to always be aware of the importance of shifts in the underlying context. These concerns impact the analysis of financial and commodity markets alike.

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November 26, 2021 by

An Analysis of Agricultural Block Trading

By David Amato, Twan Dixon, Eugene Kunda, Jerry Lavin, Robert Penksa and Rahul Varma of the Market Intelligence Branch, Division of Market Oversight, U.S. Commodity Futures Trading Commission

This article provides an extensive, data-driven analysis by the CFTC’s Division of Market Oversight on the effects of the CME Group’s introduction of block trading for the full suite of agricultural futures products.

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November 26, 2021 by

Revisiting Price Volatility Behavior in the Crude Oil Market

By Thomas K. Lee, Ph.D., Senior Economist, Energy Information Administration (EIA), U.S. Department of Energy (DOE) and Member of the GCARD’s Editorial Advisory Board and John Zyren, Ph.D., Senior Industry Economist & Econometrician, EIA, U.S. DOE

This paper compares the behavior of oil price volatility during two different time horizons: 1990 to 2003 and 2004 to 2018. The paper finds that the component of oil price volatility due to current information has diminished more quickly than previously while the systematic information component of oil price volatility has persisted longer than previously. The candidate hypotheses for why price volatility conditions have changed include fundamental changes in the markets such as the shale revolution, technology advancement, and geopolitics.

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November 26, 2021 by

U.S. Natural Gas Meets the Global LNG Market – A Potential to Reshape the NYMEX Natural Gas Term Structure

By Shikha Chaturvedi, Executive Director, Head of U.S. Natural Gas Strategy, J.P. Morgan

This article predicts that 2019 will be recognized for the meaningful step-change higher in U.S. liquefied natural gas (LNG) export capacity. One consequence of this change in the fundamental environment may be a structural shift in the forward curve as a new type of consumer participant is introduced to the U.S. natural gas balance – consumers of U.S. LNG exports.

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November 26, 2021 by

A Mean-Variance Approach for Optimizing Physical Commodity Production Decisions

By Tom Soutter, Trader, Fonterra Co-operative (New Zealand) and Isaac Manuel, Trader, Fonterra Co-operative (New Zealand)

This paper examines an approach to optimizing physical production decisions that considers risk. The paper discusses how to adapt the mean-variance-optimization approach to a constrained processor situation where the processor takes a raw input and has the option to refine it into many products.

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November 26, 2021 by

Weather Fear Premia Trades: An Update

By Hilary Till, Solich Scholar, J.P. Morgan Center for Commodities, University of Colorado Denver Business School; and Principal, Premia Research LLC

This article reviews a class of trading strategies known as “weather fear premia” trades. The article argues that these trades may comprise a type of risk premium and notes the extra diligence needed in their risk management. The article explains that both superior trade construction and an analysis of fundamentals are also critical for the successful implementation of these types of trades. The paper concludes with a cautionary note on a catastrophic trading blow-up that occurred in November 2018, illustrating the risk of such strategies.

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