Managing food industry business and financial risks with commodity-linked credit instruments
This study reviews the use and structure of commodity-linked credit instruments. It is argued that in the absence of contingent markets food firms face increasing financial risk-reduced investment, and limited access to debt markets. One strategy is to issue commodity-linked credit whose payment structure is linked to the price of an underlying commodity. In some cases, a commodity-linked bond (CLB) can be structured to provide an incentive to investors by sharing in profit gains. If the goal is to hedge financial risks, CLBs can also be constructed that reduce the loan principle or coupons depending on price movements. [JEL classifications: G13, Q13, Q14] © 2006 Wiley Periodicals, Inc. Agribusiness 22: 523-545, 2006.
Volume (Year): 22 (2006)
Issue (Month): 4 ()
|Contact details of provider:|| Web page: http://onlinelibrary.wiley.com/journal/10.1002/(ISSN)1520-6297|
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.:
- O'Hara, Maureen, 1990. "Financial contracts and international lending," Journal of Banking & Finance, Elsevier, vol. 14(1), pages 11-31, March.
- Hilliard, Jimmy E. & Reis, Jorge, 1998. "Valuation of Commodity Futures and Options under Stochastic Convenience Yields, Interest Rates, and Jump Diffusions in the Spot," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 33(01), pages 61-86, March.
- N. K. Chidambaran & Chitru S. Fernando & Paul A. Spindt, 1999. "Credit Enhancement through Financial Engineering: Freeport-McMoRan's Gold-Denominated Depository Shares," Center for Financial Institutions Working Papers 99-35, Wharton School Center for Financial Institutions, University of Pennsylvania.
- Black, Fischer, 1976. "The pricing of commodity contracts," Journal of Financial Economics, Elsevier, vol. 3(1-2), pages 167-179.
- Robert C. Merton, 1973. "Theory of Rational Option Pricing," Bell Journal of Economics, The RAND Corporation, vol. 4(1), pages 141-183, Spring.
- Innes, Robert, 1993. "Debt, Futures and Options: Optimal Price-Linked Financial Contracts under Moral Hazard and Limited Liability," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(2), pages 271-95, May.
- Harrison, J. Michael & Pliska, Stanley R., 1981. "Martingales and stochastic integrals in the theory of continuous trading," Stochastic Processes and their Applications, Elsevier, vol. 11(3), pages 215-260, August.
- Cox, John C. & Ross, Stephen A. & Rubinstein, Mark, 1979. "Option pricing: A simplified approach," Journal of Financial Economics, Elsevier, vol. 7(3), pages 229-263, September.
- Gibson, Rajna & Schwartz, Eduardo S, 1990. " Stochastic Convenience Yield and the Pricing of Oil Contingent Claims," Journal of Finance, American Finance Association, vol. 45(3), pages 959-76, July.
- Miltersen, Kristian R. & Schwartz, Eduardo S., 1998. "Pricing of Options on Commodity Futures with Stochastic Term Structures of Convenience Yields and Interest Rates," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 33(01), pages 33-59, March.
- Schwartz, Eduardo S, 1997. " The Stochastic Behavior of Commodity Prices: Implications for Valuation and Hedging," Journal of Finance, American Finance Association, vol. 52(3), pages 923-73, July.
When requesting a correction, please mention this item's handle: RePEc:wly:agribz:v:22:y:2006:i:4:p:523-545. 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: (Wiley-Blackwell Digital Licensing)or (Christopher F. Baum)
If references are entirely missing, you can add them using this form.