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Name: Wojtek Sikorzewski
Email: sikorzewski at econ.unicaen.fr
Institution: Universite de Caen

Co-author: none

Title: A Corner Solution : Commodity Futures, Default Fines, and 
Unintended Consequences

Internet Address of abstracted work: not available

By mail:
Universite de Caen
Faculte de Sciences Economiques, MRSH 231
Esplanade de la Paix
14032 Caen Cedex, France

Language:

Abstract:
We analyze one specific form of market manipulation - corners (or 
squeezes) in some commodity futures markets. In the analysis we focus 
on the role of institutional factors such as the storage capacity at 
the delivery point and the severity of fines imposed on defaulting 
shorts. We analyze the influence of these factors on the likelihood 
that a corner-style manipulation might occur.

A reduction in storage capacity or an increase in the amount of fines 
imposed on defaulting shorts increases the probability of the 
occurrence. However, the latter factor seems quiet paradoxical. A 
high level of fines in case of default on a futures contract should 
decrease the number of defaults and thus make a futures contract more 
reliable. But, it tends to make the corners more frequent and thus 
makes the futures contracts less useful for the hedgers.

Bibliography: Last name, first name. "A Corner Solution : Commodity 
Futures, Default Fines, and Unintended Consequences." New York 
Economic Review, Fall 2002.

Subject: W
Geographical Area: 4
Country/Region:
Time Period: 0

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