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An Analysis of the Fish Pool Market in the Context of Seasonality and Stochastic Convenience Yield

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  • Christian-Oliver Ewald
  • Ruolan Ouyang

Abstract

On the basis of a popular two-factor approach applied in commodity markets, we develop a model featuring seasonality and study futures contracts written on fresh farmed salmon, which have been actively traded at the Fish Pool market in Norway since 2006. The model is estimated by means of Kalman filtering, using a rich data set of contracts with different maturities traded at Fish Pool between 01/01/2010 and 24/04/2014. The results are then discussed in the context of other commodity markets, specifically live cattle, which is a substitute. We show that the seasonally adjusted model proposed in this article describes the behavior of salmon price very well. More importantly we show that seasonality exists in the salmon futures market. This is highly important in pricing of contingent claims, designing hedging strategies, and making real investment decisions in marine resources.

Suggested Citation

  • Christian-Oliver Ewald & Ruolan Ouyang, 2017. "An Analysis of the Fish Pool Market in the Context of Seasonality and Stochastic Convenience Yield," Marine Resource Economics, University of Chicago Press, vol. 32(4), pages 431-449.
    • Handle: RePEc:ucp:mresec:doi:10.1086/693375
    DOI: 10.1086/693375
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    Cited by:

    1. Jilong Chen & Christian Ewald & Ruolan Ouyang & Sjur Westgaard & Xiaoxia Xiao, 2022. "Pricing commodity futures and determining risk premia in a three factor model with stochastic volatility: the case of Brent crude oil," Annals of Operations Research, Springer, vol. 313(1), pages 29-46, June.
    2. Ma, Zonggang & Ma, Chaoqun & Wu, Zhijian, 2020. "Closed-form analytical solutions for options on agricultural futures with seasonality and stochastic convenience yield," Chaos, Solitons & Fractals, Elsevier, vol. 137(C).
    3. Ewald, Christian & Zou, Yihan, 2021. "Analytic formulas for futures and options for a linear quadratic jump diffusion model with seasonal stochastic volatility and convenience yield: Do fish jump?," European Journal of Operational Research, Elsevier, vol. 294(2), pages 801-815.
    4. Schütz, Peter & Westgaard, Sjur, 2018. "Optimal hedging strategies for salmon producers," Journal of Commodity Markets, Elsevier, vol. 12(C), pages 60-70.

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