Relaxing Standard Hedging Assumptions in the Presence of Downside Risk
AbstractThe purpose of this study is to analyze how the introduction of a downside risk measure and less restrictive assumptions can change the optimal hedge ratio in the standard hedging problem. Based on a dataset of futures and cash prices for soybeans in the U.S., the empirical findings indicate that optimal hedge ratios change dramatically when a one-sided risk measure is adopted and standard assumptions are relaxed. Further, the results suggest that in a downside risk framework with realistic hedging assumptions there is little or no incentive for farmers to hedge.
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Bibliographic InfoPaper provided by NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management in its series 2005 Conference, April 18-19, 2005, St. Louis, Missouri with number 19040.
Date of creation: 2005
Date of revision:
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Web page: http://www.agebb.missouri.edu/ncrext/ncr134/
Other versions of this item:
- Mattos, Fabio & Garcia, Philip & Nelson, Carl, 2008. "Relaxing standard hedging assumptions in the presence of downside risk," The Quarterly Review of Economics and Finance, Elsevier, vol. 48(1), pages 78-93, February.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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- Woodard, Joshua D. & Sherrick, Bruce J. & Schnitkey, Gary D., 2009. "Revenue Risk Reduction Impacts of Crop Insurance in a Multi-Crop Framework," 2009 Conference, April 20-21, 2009, St. Louis, Missouri 53043, NCCC-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
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