Hedging with Crop Yield Futures: A Mean-Variance Analysis
AbstractThis investigation into the use of new Chicago Board of Trade yield futures to manage price and yield risks shows that a risk-minimizing firm can reduce its variance of profit by hedging in both markets compared to hedging in price futures only. The greater the variance of the contract underlying yield, the less effective the two-instrument hedge. Hedging effectiveness of the dual strategy also depends on the price and yield bases, and the effect of a change in either basis depends on whether the established crop yield futures position is short or long. Copyright 1996, Oxford University Press.
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Bibliographic InfoArticle provided by Agricultural and Applied Economics Association in its journal American Journal of Agricultural Economics.
Volume (Year): 78 (1996)
Issue (Month): 4 ()
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19580, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
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- Haigh, Michael S. & Holt, Matthew T., 1999. "Volatility Spillovers Between Foreign Exchange, Commodity And Freight Futures Prices: Implications For Hedging Strategies," Faculty Paper Series 23997, Texas A&M University, Department of Agricultural Economics.
- Phelippe-Guinvarc'h, Martial V. & Cordier, Jean E., 2006. "A private management strategy for the crop yield insurer: A theoretical approach and tests," Insurance: Mathematics and Economics, Elsevier, vol. 39(1), pages 35-46, August.
- Yun, Won-Cheol & Jae Kim, Hyun, 2010. "Hedging strategy for crude oil trading and the factors influencing hedging effectiveness," Energy Policy, Elsevier, vol. 38(5), pages 2404-2408, May.
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