Estimated Hedging Risk With Cash Settlement Feeder Cattle Futures
AbstractBeginning with the September 1986 contract, feeder cattle futures have been settled based on cash settlement rather than physical delivery. The effect that cash settlement will have on hedging risk for feeder cattle was estimated using Arkansas prices for 1977-86, but the results should be representative of other markets. For 600-700 pound steers and heifers, hedging risk is estimated to be lower for hedges placed in the new cash settlement contract. For steers and heifers weighing less than 600 pounds, hedging risk is estimated to be lower for the cash settlement contract for fall hedges, whereas hedging risk is estimated to increase for spring hedges.
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Bibliographic InfoArticle provided by Western Agricultural Economics Association in its journal Western Journal of Agricultural Economics.
Volume (Year): 13 (1988)
Issue (Month): 01 (July)
Livestock Production/Industries; Marketing;
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- Lien, Donald & Tse, Yiu Kuen, 2006. "A survey on physical delivery versus cash settlement in futures contracts," International Review of Economics & Finance, Elsevier, vol. 15(1), pages 15-29.
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- Manfredo, Mark R. & Sanders, Dwight R., 2003. "Minimum Variance Hedging And The Encompassing Principle: Assessing The Effectiveness Of Futures Hedges," 2003 Annual meeting, July 27-30, Montreal, Canada 22247, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
- Schroeder, Ted C. & Yang, Xiaolou, 2001. "Hedging Wholesale Beef Cuts," 2001 Annual Meeting, July 8-11, 2001, Logan, Utah 36091, Western Agricultural Economics Association.
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