| dc.description.abstract | This study explores the presence of risk premium in Brent Crude and TTF European Gas. Risk premium theory is a controversial theory which explains the future prices and risk premium itself is important to study in terms of compensation for the risk transferred from hedgers to speculators and the forecasting of spot prices. To find out whether risk premium is present in future contracts of Brent crude and TTF European gas, this study uses past 20 years (2003 to 2023) of spot price and 1-month, 3-month, 6-month future price data of Brent crude. Additionally, the study takes past 18 years (2005 to 2023) of spot price and 1-month, 2-month future price data of TTF European gas. Linear regression modelling is used to explore the relationship of the basis with spot price change and the risk premium. The results of the regression shows the strong evidence of presence of risk premium in all future contracts for both Brent crude and TTF European gas. In addition, the results also explain that the basis has forecast power over the spot price of Brent crude. | en_US |
