| General equilibrium effects of a futures market are analyzed in a two-sector model of an economy populated with agents who have differential risk aversion. Conditions leading to changes in the industry formation are derived and their effect on agents' welfare is measured by equivalent variation. A class of speculators who most benefit from the futures market endogenously arises in equilibrium. In a two-period model, storage and savings affect the general equilibrium while preserving conventional partial equilibrium derivative pricing results. |
