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Convenience Yield and Risk Premium - Comparison of the European and US Natural Gas MarketsMargarethe RammerstorferVienna University of Economics and Business Administration - Department of Corporate Finance Thomas KremserVienna University of Economics and Business Administration - Institute for Finance, Banking and Insurance August 23, 2010 23rd Australasian Finance and Banking Conference 2010 Paper Abstract: In the following article, the marginal convenience yield and risk premium in the European natural gas market as well as the US natural gas market are determined and analysed. In this context, we also analyze whether there exists a relationship between the marginal convenience yield and the risk premium which are both important models in asset pricing but often quite separated. We find, that the marginal convenience yield and risk premium are measuarable and economically significant for the European trading hubs, and also for the American hub. Our empirical results, support the conclusion that the marginal convenience yield and the risk premium seems to be key factors that impact the spot and futures prices for natural gas. Moreover, the anaylsis reveals that there is no direct impact of the marginal convenience yield on the risk premium.
Keywords: Convenience Yield, Risk Premium, Commodity Pricing, Natural Gas JEL Classification: G12, G13, Q40 working papers seriesDate posted: August 23, 2010 ; Last revised: March 18, 2011Suggested CitationContact Information
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