A Futures Market for International Trade
Udo Broll, Bernhard Eckwert
Abstract
The paper studies the question how future markets for international trade, which do not exist in the real world, would perform in an equilibrium context. We find that future markets, where terms of trade risks can be insured directly, generate zero equilibrium risk premia. Future markets for international trade enable market participants to deal effectively, and free of cost, with instabilities in relative prices for international commodity trade.
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