Futures market equilibrium with heterogeneity and a spot market at harvest

This paper studies equilibrium in the futures market for a commodity in a s ingle good economy, which is populated by heterogeneous producers and specu lators. The commodity is traded only in the spot market at harvest whereas futures contracts written on the commodity are traded continuously. The mod el illustrates the role of heterogeneity and non-tradeness in a futures mar ket equilibrium. The results show that the futures price is driven by aggre gate wealth, rather than the spot price as in other models and that the fut ures price process is a simple one which depends on the relative risk proce ss. (C) 2001 Elsevier Science B.V. All rights reserved.