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The Derived Demand with Hedging Cost Uncertainty in the Futures Markets

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Author Info
Paroush, Jacob
Wolf, Avner
Abstract

This study explores the significance of production technology and other parameters on the employment of inputs and hedging. The paper establishes an explicit relationship between the risk as well as prices parameters and the derived demand, production and hedging. The authors find that the futures price relative to the expected spot price affects the demand for production factors. Additionally, the presence of basis risk determines the impact of prices and risk parameters on the derived demand for inputs. Production technology is instrumental in fixing the size of the change in the demand, given a change in the model's parameters. Copyright 1992 by Royal Economic Society.

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Publisher Info
Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 102 (1992)
Issue (Month): 413 (July)
Pages: 831-44
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Handle: RePEc:ecj:econjl:v:102:y:1992:i:413:p:831-44

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  1. Moawia Alghalith, 2008. "Hedging and production decisions under uncertainty: A survey," Quantitative Finance Papers 0810.0917, arXiv.org. [Downloadable!]
  2. repec:mop:credwp:04.11.52 is not listed on IDEAS
  3. Joost M.E. Pennings & Raymond M. Leuthold, 1999. "Commodity Futures Contract Viability: A Multidisciplinary Approach," Finance 9905002, EconWPA. [Downloadable!]
  4. repec:mop:credwp:04.01.44 is not listed on IDEAS
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This page was last updated on 2009-11-12.


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