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Managing multiple international risks simultaneously with an optimal hedging model

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  • Gboroton F. Sarassoro
  • Raymond M. Leuthold

Abstract

A risk management model based on portfolio theory which accounts jointly for price, quantity, interest rate and exchange rate risks is developed and applied to cocoa and coffee production and exports in the Ivory Coast. Utilizing commodity and financial futures markets jointly, the results show that a government export agency can reduce risks from 27% to 89% by following a multicommodity hedging program which manages several risks simultaneously. The model and technique developed are applicable to many multiproduct firm and international risk management situations.

Suggested Citation

  • Gboroton F. Sarassoro & Raymond M. Leuthold, 1991. "Managing multiple international risks simultaneously with an optimal hedging model," Agricultural Economics, International Association of Agricultural Economists, vol. 6(1), pages 31-47, October.
    • Handle: RePEc:bla:agecon:v:6:y:1991:i:1:p:31-47
    DOI: 10.1111/j.1574-0862.1991.tb00169.x
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    Cited by:

    1. Robison, Lindon J. & Hanson, Steven D., 1995. "Analyzing Firm Response to Risk Using Mean-Variance Models," Staff Paper Series 201207, Michigan State University, Department of Agricultural, Food, and Resource Economics.
    2. Apperson, Pat & Parton, Kevin A. & Macpherson, Angela I., 1992. "Cotton Futures Hedging during the 1990-91 Season," 1992 Conference (36th), February 10-13, 1992, Canberra, Australia 146419, Australian Agricultural and Resource Economics Society.

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