ABSTRACT
Models of futures trading developed in recent years contain various unsatisfactory aspects: for example, Stein's model does not determine the quantity of stocks held by the individual; the models of Brennan and Telser assume identical expectations; that of Peston and Yamey does not deal with the determination of individual equilibrium, while that of Leland Johnson does not contain an analysis of market equilibrium. 1 The model developed here attempts to take account of these difficulties. The aim of this chapter is to develop a technique of analysis for speculation in commodity futures. The technique can also be used to analyse speculation in spot contracts, and hence to deal with the speculative element in positions of under- or over-hedging. 2
