Separation and Hedging Results with State-Contingent Production
A state-contingent model of production under uncertainty is developed and compared with more traditional models of production under uncertainty. Producer behavior with both production and price risk, in the presence and in the absence of futures and forward markets, is analyzed in this state-contingent framework. Conditions for the optimal hedge to be positive or negative are derived. The authors also show that, under plausible conditions, a risk-averse producer facing price uncertainty and the ability to hedge price risk will never willingly adopt a non-stochastic technology. New separation results, which hold in the presence of both price and production risk, are then developed. These separation results generalize Townsend's spanning results by reducing the number of necessary forward markets by one. Copyright 1997 by The London School of Economics and Political Science
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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 64 (1997)
Issue (Month): 254 (May)
|Contact details of provider:|| Postal: Houghton Street, London WC2A 2AE|
Phone: +44 (020) 7405 7686
Web page: http://www.blackwellpublishing.com/journal.asp?ref=0013-0427
More information through EDIRC
|Order Information:||Web: http://www.blackwellpublishing.com/subs.asp?ref=0013-0427|