Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/43246
Authors: 
Muermann, Alexander
Shore, Stephen H.
Year of Publication: 
2008
Series/Report no.: 
CFS Working Paper 2008/37
Abstract: 
When a spot market monopolist participates in a derivatives market, she has an incentive to deviate from the spot market monopoly optimum to make her derivatives market position more profitable. When contracts can only be written contingent on the spot price, a risk-averse monopolist chooses to participate in the derivatives market to hedge her risk, and she reduces expected profits by doing so. However, eliminating all risk is impossible. These results are independent of the shape of the demand function, the distribution of demand shocks, the nature of preferences or the set of derivatives contracts.
Subjects: 
Spot Market Power
Derivates Market
Hedging
JEL: 
D24
G32
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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