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Optimism and pessimism in commodity price hedging

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  • Jonathan Tuthill

Abstract

Rank dependent utility is used to model the use of corn futures and options on corn futures for a corn buyer. Optimal futures and options positions are numerically calculated by maximising rank dependent utility for a variety of cases. The cases represent three different types of agents--pessimists, strong optimists and weak optimists--for several levels of risk aversion, with and without transactions costs. Whether or not an agent trades as a speculator or a hedger is found to depend on his level of optimism or pessimism, risk aversion and transactions costs. Copyright 2004, Oxford University Press.

Suggested Citation

  • Jonathan Tuthill, 2004. "Optimism and pessimism in commodity price hedging," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 31(3), pages 289-307, September.
  • Handle: RePEc:oup:erevae:v:31:y:2004:i:3:p:289-307
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    Cited by:

    1. Golo-Friedrich Bauermeister & Daniel Hermann & Oliver Musshoff, 2018. "Consistency of determined risk attitudes and probability weightings across different elicitation methods," Theory and Decision, Springer, vol. 84(4), pages 627-644, June.

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