Commodity Price Fluctuations Research Articles

ANALISA LINDUNG NILAI ( HEDGING ) EVALUASI ATAS TRANSAKASI DERIVATIF PADA PERUSAHAAN PT. SURYA SEMESTA INTERNUSA TBK. PERIODE TAHUN 2019

Hedging is an important approach to managing financial risk in a corporate context. The purpose of hedging is to protect the company's value from fluctuations in prices, interest rates or other risks that could negatively impact the company's financial performance. This study aims to analyze hedging practices in the context of the company PT Surya Semesta Internusa Tbk. This research methodology uses secondary data analysis which includes financial reports, risk reports, and company hedging policies. The results show that PT Surya Semesta Internusa Tbk has adopted a proactive hedging approach in managing financial risk. The company uses various hedging instruments, such as futures contracts, options and swaps, to mitigate the impact of commodity price fluctuations and foreign currency risk on their financial performance. PT Surya Semesta Internusa Tbk actively analyzes and identifies the risks it faces and implements appropriate hedging strategies to manage these risks. This study also reveals that hedging management at PT Surya Semesta Internusa Tbk is based on risk management principles that are integrated into the overall corporate strategy. The company has a structured hedging policy and clear standard operating procedures. In addition, PT Surya Semesta Internus Tbk's team is equipped with the necessary knowledge and skills to implement and monitor hedging effectively. However, this study also identified several challenges faced by PT Surya Semesta Internusa Tbk in implementing hedging. These challenges include the complexity of hedging instruments, market uncertainty, and regulatory changes. PT Surya Semesta Internusa Tbk needs to continue to evaluate and adjust their hedging strategy to overcome this challenge. This research provides better insight into hedging practices in the context of the company PT Surya Semesta Internusa. The results of this study can provide guidance for other companies in developing effective and integrated hedging strategies to manage financial risk and protect company value from adverse market fluctuations.

The tale of two titans: US and China's distinct impact on the global economy

This study employs a GVEC model to analyze the global influences of US and China's monetary policies. It reveals that a 25 basis point US interest rate hike prompts a -0.18 ppt change in foreign economies, predominantly indirectly via commodity price fluctuations and cross-country interactions. Conversely, China incites a -0.10 ppt direct effect, largely through the trade channel. In terms of foreign GDP fluctuations, the US accounts for a considerable 10.5 %, with its equity markets playing a significant role, compared to China's 2.3 % contribution. These results reveal distinct paths for US and China's global influence via financial and trade routes, respectively.

Extreme risk dependence and time-varying spillover between crude oil, commodity market and inflation in China

The fluctuation of general commodity prices, particularly crude oil prices, exerts a substantial influence on the economic development of all countries. Based on the mean and quantile spillover index of time-varying parameter vector autoregressive (TVP-VAR), we measure the spillover effects among crude oil, commodity market, and inflation in China under normal and extreme conditions from April 2018 to January 2023. The results show the interdependence among crude oil, commodity markets, and inflation; however, the degree of correlation varies at different quantiles. Notably, the spillover index is significantly higher at the extreme quantile, indicating that extreme risks can easily affect the spillover effect among crude oil, commodity markets, and inflation. Meanwhile, the tail risk spillover effect among crude oil, commodity markets, and inflation exhibits asymmetry, indicating that the spillover effect is greater during downward market conditions than upward ones. Furthermore, oil prices serve as a significant provider of systemic risk, both in normal market conditions and during times of extreme risk. In most cases, oil prices transfer more risks to inflation and commodity markets, commodity markets transfer more risks to inflation, and the paired spillover effects between commodity markets fluctuate over time. Finally, our results hold significant implications for investors, market regulators, and policymakers.

On foreign drivers of emerging markets fluctuations

We quantify the fraction of business cycles fluctuations in emerging markets explained by the combined dynamics of a set of common external drivers. By means of specific constraints on a state-space model fitted to a panel of real, financial and commodity price data for twelve emerging economies, we single out financial, commodity and growth common factors driving jointly a third of GDP fluctuations. Our partition of foreign shocks faced by emerging markets offers new insights into the primitive sources of emerging market cycles and feeds policy discussions in terms of the effects of global financial cycles versus commodity prices. Even when we control for the presence of financial cycles, fluctuations in commodity prices play a predominant role on the performance of emerging markets.

Application of the geometric Brownian motion model in West Texas Intermediate crude oil price prediction

Crude oil is one of the primary commodities in the global economy. Crude oil prices are among the most complex and challenging to model because of the irregular, non-linear, non-stationary fluctuations in crude oil prices and their high volatility. It is essential to predict crude oil commodity prices to reduce the negative impact of fluctuations in crude oil commodity prices. Several mathematical models can be used to forecast crude oil commodity prices. One model that can be used is the Geometric Brownian Motion model, also known as the Wiener process. In this research, predictions for WTI (West Texas Intermediate) crude oil in 2022 were carried out using the Geometric Brownian Motion model. The results of this research are predictions of crude oil prices for July 2023 with iterations of 100, 200, and 1000, respectively, producing MAPE values of 6.092415%, 7.364198%, and 7.276606%.

Commodity prices and business cycles in small open economies: the role of news shocks

PurposeThe authors explore the hypothesis that some movements in commodity prices are anticipated (news shocks) and can trigger aggregate fluctuations in small open emerging economies. This paper aims to discuss the aforementioned objective.Design/methodology/approachThe authors build a multi-sector dynamic stochastic general equilibrium model with endogenous commodity production. There are five exogenous processes: a country-specific interest rate shock that responds to commodity price fluctuations, a productivity (TFP) shock for each sector and a commodity price shock. Both TFP and commodity price shocks are composed of unanticipated and anticipated components.FindingsThe authors show that news shocks to commodity prices lead to higher output, investment and consumption, and a countercyclical movement in the trade-balance-to-output ratio. The authors also show that commodity price news shocks explain about 24% of output aggregate fluctuations in the small open economy.Practical implicationsGiven the importance of both anticipated and unanticipated commodity price shocks, policymakers should pay attention to developments in commodity markets when designing policies to attenuate the business cycles. Future research should investigate the design of optimal fiscal and monetary policies in SOE subject to news shocks in commodity prices.Originality/valueThis paper contributes to the knowledge of the sources of fluctuations in emerging economies highlighting the importance of a new source: news shocks in commodity prices.

Factors Responsible for Movements in Real Effective Exchange Rate of Selected African Countries

The study examined the determinants of real effective exchange rate on selected African countries, namely, Nigeria, Libya, Angola, Egypt, Gabon, Ghana, and Chad over the sample period of 1980 to 2023. The vector error correction methodology was used in the study. The results suggest the following findings; In Nigeria, variations in the real effective exchange rate responded significantly and positively to Brent crude oil prices, domestic inflation rate, external debt burden, the volume of foreign exchange reserves, and prices of primary export. It also responded negatively to foreign investment flows. Whenever the real effective exchange rate deviated from its equilibrium, 74% of its disequilibrium was restored in Nigeria. In Libya, the response of real effective exchange rate was positive and significantly related to commodity prices of primary export but responded negatively and significantly to Brent crude oil prices, foreign investment inward stock, and foreign reserve holdings. In addition, 57% of the disequilibrium in the real effective exchange rate of the Libya currency was restored to the long-term value. In Angola, it was found that the variations in the real effective exchange rate had a positive and significant response with Brent crude oil prices and foreign investment inflows. It however responded negatively with a significance balance of payments and the volume of foreign reserves. About 60% of the disequilibrium in the real effective exchange rate was restored to the long-term value in Angola. In Egypt, the real effective exchange rate responded positively with significance to Brent crude oil prices, foreign investment inflows, and prices of primary export. Additionally, it responded negatively and significantly to the domestic inflation rate and external reserve holdings. Within the period of study in Egypt, 53% of the disequilibrium in the real effective exchange rate was restored to equilibrium. In Gabon, variations in the real effective exchange rate had a positive and significant response with Brent crude oil prices, real interest rate, external debt burden, and the volume of foreign exchange reserves. Also in Gabon, the real effective exchange rate responded negatively and significantly to the inflation rate and prices of primary export. Accordingly, 82% of the disequilibrium in the real effective exchange rate was restored to equilibrium. The Ghanaian real effective exchange rate relative to the dollar responded significantly and positively to Brent crude oil prices, domestic inflation rate, foreign debt burden, and foreign investment flows while it negatively responded to the Ghanaian balance of payment position. Each time the real effective exchange rate of the Ghanaian cedi deviated from its equilibrium value, 79% of its disequilibrium was restored. In Chad, variations in the real effective exchange rate responded significantly but negatively to the domestic inflation rate while it positively and significantly responded to Brent crude oil prices, external balance position, the volume of foreign reserve holdings, and foreign direct investment inflows. Also, whenever the real effective exchange rate deviated from its equilibrium value in Chad, 65% of its disequilibrium was restored in the long run. Based on these results, policymakers should focus on addressing structural constraints, commodity price fluctuations, and improve the business environment by anchoring policies of economic stability to boost competitiveness in trade and industry. There is also the need for policymakers to consider country-specific factors when formulating exchange rates.

A changepoint analysis of exchange rate and commodity price risks for Latin American stock markets

Focusing on countries whose economies are exposed to fluctuations in commodity prices and exchange rates, we study the vulnerability of these stock market returns to exchange rate and commodity price shocks using non-parametric structural break tests for volatility and dependence. The return distributions are modeled using a Copula-GARCH model incorporating the estimated changepoints and we measure risk-spillovers with the conditional Value-at-Risk. We find evidence for various changepoints at different points in time, implying changes in risk and spillovers. In particular, there is evidence of increased spillover risk after the outbreak of the global financial crisis in 2008, as well as higher conditional risk following the Covid-19 outbreak.

Effect of sovereign wealth funds in commodity‐exporting economies when commodity prices affect interest spreads

AbstractWe reconsider the role of a sovereign wealth fund in commodity‐exporting economies facing recent volatile fluctuations of commodity prices due to the COVID‐19 shock. We examine the welfare‐improving effect of a sovereign wealth fund from the new perspective of the link between commodity prices and interest rate spreads, which is unique to emerging economies. We show that a sovereign wealth fund becomes more effective in improving welfare for commodity‐exporting economies with a stronger link between their commodity prices and interest rate spreads.

Impacto de la invasión rusa a Ucrania en las finanzas mundiales

The invasion of the Russian Federation into Ukraine, a sovereign country, has been interpreted from different points of view: However, beyond the different opinions, it is clear that this war, which took place in Eastern Europe, has meant a hard blow for global finances, with concrete effects in the increase of fuel prices (gas and coal), in high inflation rates and, according to data from the World Bank (WB, 2023), it has also created an international environment of restrictive financial conditions that hinder macroeconomic recovery in terms of sustainable economic development, after the COVID-19 pandemic. In this order of ideas, using a documentary methodology of geopolitical analysis, which values the geographic conditions of each country, its particular history and its international relations, the objective of the article was to interpret the impact of the Russian invasion of Ukraine on world finances. The results obtained allow us to conclude that the Russian invasion of Ukraine has had far-reaching consequences on world finance. The economic impacts of this invasion have been significant, with disruptions in supply chains, fluctuations in inflation and commodity prices, among others.

Seasonal Variations And Forecasting In Wholesale Prices Of Okra In Surat Market Of Gujarat, India

The analysis of prices and market arrivals over time is important for formulating a sound agricultural price policy. Fluctuations in market arrivals largely contribute to price instability. In order to devise the appropriate ways and means for reducing the price fluctuations of agricultural commodities, there is a need to have a thorough understanding of the price behavior over time.Forecasting the price of agricultural commodities, presents some unique challenges such as data quality issues, weather aberrations, high fluctuations, price variations across neighboring marketplaces, etc. On the demand side, the instability in the prices of agricultural commodities is influenced by a number of factors such as annual variation in production, low price elasticity of demand and seasonality of agricultural production.The study relied upon the secondary time series data on monthly market prices and arrivals of Okra collected from the Agricultural Produce Market Committee, Surat. Analysis was performed on the monthly and annual time series data on wholesale price to develop reliable forecast for 2022. Month wise Seasonal indices of Okra in the Surat market showed that the seasonal price indices were above average from November to March while below average from May to October when market arrivals are more. The seasonal pattern showed that prices declined from April to October and reached the lowest point in May and reached peak in December. Seasonal fluctuations were observed both in market arrivals as well as prices of Okra. In the present investigation, various Seasonal, Non-seasonal, and Seasonal ARIMA (Box-Jenkins) models were developed to measure the forecast accuracy. The best model was chosen on the basis of the least values of Schwarz Bayesian criteria (SBC) and Mean absolute percentage error (MAPE). After performing a series of diagnostic tests, it was observed that N-BIC (12.417) and MAPE (22.88) were the least for SARIMA (0,0,2) (0,1,1)12 model. It came out to be the most representative model for the price of Okra in the Surat market. The model can be used for reaching dependable price forecasts. The quantification of these aspects in the vegetables is an immediate need to formulate effective policies to make prices stable thereby safeguard the interest of the farmers as well as the consumer.

Critical minerals versus major minerals: a comparative study of exploration budgets

AbstractDisruptions in the minerals supply chain play a central role in defining the future stock of minerals; therefore, an in-depth analysis of the outcomes and variables affecting exploration is required. In comparative terms, the exploration of critical minerals and major minerals presents geological and technical differences; thus, exploration budgets for critical minerals should be expected to depart from those observed in other minerals. In this context, the main goal of this paper is to contrast how exploration budgets differ between critical and major minerals when considering a set of key variables. We take a multivariate statistical analysis approach based on firm-level budget exploration data to show four key findings: exploration budgets allocated for critical minerals remain consistently lower than major minerals even when controlling for other factors. Moreover, they present a higher sensitivity to fluctuations in commodity prices. Besides, the investment made by larger companies in critical minerals significantly lags behind those made by junior companies. Additionally, the focus of exploration activity for critical minerals predominantly lies in the earlier stages of the exploration process. We expect these initial results to be used as a step forward to facilitate the discussion about exploration policies and, consequently, the reliability of the supply chain.

Economic policy uncertainty, geopolitical risks, and the heterogeneity of commodity price fluctuations in China ——an empirical study based on TVP-SV-VAR model

The combination of geopolitical conflicts and economic shocks could cause severe volatility in the global commodity market. Based on the monthly data from June 2006 to March 2023, this paper employs the TVP-SV-VAR model to investigate the time-varying impacts of economic policy uncertainty (EPU) and China's geopolitical risk (GPRC) on China's commodities prices (CCPI). The findings reveal that: (1) CCPI can be collectively influenced by EPU and GPRC shocks, with time-varying impulse responses showing notable fluctuations with alternating positive and negative values. The response of CCPI to EPU is more intense than that to GPRC shock after 2019; (2) Under the financial crisis, GPRC has a significantly positive impact on CCPI, while positive responses to global EPU and China's EPU are more pronounced under the Russia-Ukraine conflict. Under the Sino-US trade friction, the responses of CCPI to various shocks are mostly positive, with a continuing positive impact of EPU; (3) The responses of energy prices, agricultural product prices, and non-ferrous metal prices align with that of overall commodity prices. However, under the Russia-Ukraine conflict, the positive impulse responses of non-ferrous metal prices to EPU and GRPC shocks are persistent.

Understanding Short-Term and Long-Term Price Fluctuations of Main Staple Food Commodities in Aceh Province, Indonesia: An ARDL Investigation

Aceh Province still relies on external sources from other regions for its main staple food commodities, resulting in unpredictable price fluctuations. To address this issue, it is essential to identify the key determinants responsible for these fluctuations and implement suitable preventive measures and policies. Utilizing monthly time-series data from January 2016 to December 2020 and employing the Autoregressive Distributed Lag (ARDL) approach, we investigate the short-term and long-term impact of variables like raw material prices, rainfall, and price index received by farmers on the price fluctuations. The results of the ARDL estimation reveal that all selected independent variables play a crucial role and significant in influencing the price fluctuations of main staple food commodities. Armed with these findings, we suggest that policymakers can provide necessary resources to farmers, strengthen weather monitoring systems, and enhance market transparency, thus better controlling future price fluctuations of regional staple food commodities.

Ultra Micro Financing (UMi) and Trade Labor: Impacts on GRDP in the Large Trade and Retail Business Field of Bangka Belitung Islands Province (2017-2022)

Ultra Micro Financing (UMi) aims to provide fast and accessible financing for ultra-micro businesses, fostering government-financed entrepreneurs. UMi Financing’s dominance can influence labor absorption and Gross Regional Domestic Product (GRDP) in the Large Trade and Retail Business Field. This research analyzes the impact of UMi Financing and Trade Labor Absorption on Trade GRDP in Bangka Belitung Islands Province during 2017-2022. Path analysis measures the direct and indirect effects of UMi Financing on Trade GRDP. The findings reveal that UMi financing affects trade and GRDP in Bangka Belitung Islands Province. However, UMi Financing does not directly influence Trade GRDP when mediated by labor. Moreover, UMi Financing and Trade Labor do not significantly impact the GDP of Large Trade and Retail. Limited labor absorption in the trade sector may be attributed to the relatively small capital or financing provided by UMi. Additionally, the absorption of labor in the trade sector does not significantly affect Trade GRDP in the province, as the gross value added in the Large Trade and Retail sectors is influenced by people’s purchasing power, which is still highly dependent on commodity price fluctuations. To bolster GDP growth in the large trade and retail sectors, the government can encourage the distribution of UMi Financing. UMi Financing Distributors should intensify assistance to scale up debtor’s businesses. Diversifying UMi distribution to sectors beyond wholesale and retail trade can also be explored.

Basis Risk Analysis and Countermeasures for Enterprises’ Commodity Price Risk Management by Using Futures Hedging Strategy -- A Case Study of “Metallgesellschaft” Hedging Failure

As the international economic situation was risingly unsteady and turbulent, many enterprises have come up to make use of the futures market to minimize commodity price fluctuation risks, however, not a few suffering massively high hedging losses. These events has showed that numbers of enterprises had a lack of incisivel comprehension of the basis risk of hedging and made no fully preparation on how to control and erode losses in time as soon as the basis transfers deviated from expection. This article intends to make an in-depth discussion on basis risk through the analysis of the well-known huge losses case of the Metallgesellschaft and put forward effective and logical countermeasures, for enterprises grasping potently of basic risk resisting financial damage. In short, in order to lesson the high financial loss which exceeds the expectation caused by the unusual basis, the enterprises must establish a reasonable and supportive hedging risk assessment and optimal protective stop-loss scheme.

Research on the Influence Mechanism of RMB Exchange Rate Change on Commodity Prices

With the deepening of economic globalization and the gradual integration of domestic and foreign markets, the impact of a country's price level on the international market is becoming more and more obvious. When the external market factors change, it will easily affect the price level of a country, and then affect the economic development of a country. The rapid economic globalization and China's continuous reform and opening up have made the factors affecting China's price fluctuation more complicated. China is the largest consumer and importer in the world commodity market. The change of RMB exchange rate will not only affect the international competitiveness of China's commodities, but also greatly affect the actual interests of China's importers and exporters and their trading partners. The influence of external factors on domestic prices should not be underestimated. Only by clarifying the factors that affect this effect can we implement appropriate monetary policies accordingly to reduce the impact of exchange rate fluctuations on the domestic economy. This paper analyzes the influence mechanism of RMB exchange rate changes on commodity prices, and then provides countermeasures and suggestions for the monitoring and early warning mechanism of RMB internationalization and commodity price fluctuations.

The Impact of Gold, Oil Prices, and their Associated Implied Volatilities on Performance of Pakistan’s Stock Market

This study examined the asymmetrical implications of gold and oil prices, as well as the implied volatility that goes along with them, on the performance of Pakistan's stock market. It was used Chicago Board of Options Exchange’s GVZ and OVX index for measuring volatility in gold market and oil market respectively due to more uncertainty in commodity markets and also took historical price movements, investor’s expectations regarding global prices into account. The monthly data used from October 2009 to January 2023. An ARDL approach was employed for checking short term and long term asymmetrical. The results of ARDL revealed that oil volatility index have significant impact of Pakistan’s stock market in short-run and long-run. The Gold Volatility Index shows significant impact after one month on both stock market capitalization and KSE 100 indexes in the short run. Fluctuations in worldwide commodity prices have a significant influence on underdeveloped economies like Pakistan and have a negative effect on the entire economy. The volatility and fluctuations in oil prices lead to higher production costs, which create uncertainty in companies' cash flows.

Forecasting Commodity Market Synchronization with Commodity Currencies: A Network-Based Approach.

This paper shows that some commodity currencies (from Chile, Iceland, Norway, South Africa, Australia, Canada, and New Zealand) predict the synchronization of metals and energy commodities. This relationship links the present-value theory for exchange rates and its connection with commodity export economies' fundamentals, where prospective commodity price fluctuations affect exchange rates. Predicting commodity market return synchronization is critical for dealing with systemic risk, market efficiency, and financial stability since synchronization reduces the benefits of diversification and increases the probability of contagion in financial markets during economic and financial crises. Using network methods coupled with in-sample and out-of-sample econometrics models, we find evidence that a fall in the return of commodity-currencies (dollar appreciation) predicts an increase in commodity market synchronization and, consequently, in commodity market systemic risk. This discovery is consistent with a transitive capacity phenomenon, suggesting that commodity currencies have a predictive ability over commodities that extend beyond the commodity bundle that a country produces. The latter behavior would be exacerbated by the high financialization of commodities and strong co-movement of commodity markets. Our paper is part of a vigorously growing literature that has recently measured and predicted systemic risk caused by synchronization, combining a complex systems perspective and financial network analysis.

The influence of copper trade relation structure on copper price: From the perspective of industrial chain

Trade is an important approach to coordinating the global allocation of copper. Under the changeable international situation, the volatile relation between trading nations plays an increasingly important role in copper price fluctuation. In this paper, the influence of trade relation structure on copper commodity prices is discussed by combining the complex network and econometric model. From the perspective of the industrial chain, the upstream and downstream commodities’ market liquidity will cause the upstream commodity price to significantly change within four years. The midstream commodity price is mainly influenced by its market liquidity and chain-like trade relations’ scale. This influence peaks around the third year. The downstream commodity price is mainly influenced by its own trade relation structure. And the influence was greatest in the second year. This article provides a reference for traders to guard against possible fluctuations in commodity prices caused by changes in relation between trading countries.