Advanced Search
MyIDEAS: Login to save this paper or follow this series

The Derived Demand with Hedging Cost Uncertainty in the Futures Markets: Note and Extensions

Contents:

Author Info

  • Moavia Alghalith

Abstract

Paroush and Wolf (1992) investigated a perfectly competitive firm which faces input price uncertainty in one input of its two-input production function. The main purpose of their study was to determine the impact of the technological relationship on the derived demand when the input is hedged in a forward or futures market. They found that the partial cross derivatives of the production function and the market structure of the futures price (upward or downward bias) affect the derived demand. This note provides two extensions. First, it generalises Paroush and Wolf's theorem by using general utility function (Theorem 1). Second, it adds a new theorem (Theorem 2) that shows the impact of adding basis risk on the optimal hedging. This theorem is equally important since hedging is a decision variable. Below is a description of Paroush and Wolf's model.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.st-andrews.ac.uk/crieff/papers/dp0210.pdf
Our checks indicate that this address may not be valid because: 404 Not Found (http://www.st-andrews.ac.uk/crieff/papers/dp0210.pdf [301 Moved Permanently]--> http://crieff.wordpress.com/papers/dp0210.pdf). If this is indeed the case, please notify (Bram Boskamp)
Download Restriction: no

Bibliographic Info

Paper provided by Centre for Research into Industry, Enterprise, Finance and the Firm in its series CRIEFF Discussion Papers with number 0210.

as in new window
Length:
Date of creation: Feb 2002
Date of revision:
Handle: RePEc:san:crieff:0210

Contact details of provider:
Postal: School of Economics and Finance, University of St. Andrews, Fife KY16 9AL
Phone: 01334 462420
Fax: 01334 462438
Web page: http://crieff.wordpress.com/
More information through EDIRC

Related research

Keywords: Cost uncertainty; forward market; futures market; hedging; input price uncertainty;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Moawia Alghalith, 2008. "Hedging and production decisions under uncertainty: A survey," Papers 0810.0917, arXiv.org.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:san:crieff:0210. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bram Boskamp).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.