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Regional Limitations on the Hedging Effectiveness of Natural Gas Futures

Emile J. Brinkmann and Ramon Rabinovitch

Year: 1995
Volume: Volume16
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol16-No3-5
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Abstract:
This paper examines the extent to which limitations in the transportation system for the natural gas market in the United States narrows the effectiveness of the NYMEX natural gas future contract as a hedging instrument and why a second contract with a different delivery point was approved during 1995. We find that the NYMEX contract is an effective hedging instrument for gas sold into pipelines for consumption in southern, eastern and midwestern states, but does, not provide an effective hedge for gas sold for Rocky Mountain and West Coast states.



Chaos in Natural Gas Futures?

Victor Chwee

Year: 1998
Volume: Volume19
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol19-No2-10
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Abstract:
Technical analysis using charting techniques to forecast future price trends can be difficult due to the volatile and unpredictable nature of futures market. Alternatively, the emergence of chaos theory seeks to find order in random looking futures price behavior. Hence, this paper tests for the presence of nonlinearity and chaos using the NYMEX 1 -month, 2-month, 3-month, and 6-month daily natural gas settlement prices, from April 1990 to September 1996. In doing so, we use the BDS statistic of Brock, Dechert, and Scheinkman (1987) for nonlinearity testing and then proceed to compute the Lyapunov spectra to determine to what degree futures data resemble a chaotic system. Although the results indicate the presence of nonlinearity, they fail to provide significant evidence of deterministic chaos.





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