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A Bayesian Implementation of the Standard Optimal Hedging Model: Parameter Estimation Risk and Subjective Views

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  • Shi, Wei
  • Irwin, Scott H.

Abstract

We develop a Bayesian implementation of the standard optimal hedging model to analyze the impact of hedgers' subjective views on their hedging behavior. The results show the subjective views have a substantial impact on hedgers' optimal positions, explaining the large cross-sectional and time series variation of hedging positions in practice.

Suggested Citation

  • Shi, Wei & Irwin, Scott H., 2005. "A Bayesian Implementation of the Standard Optimal Hedging Model: Parameter Estimation Risk and Subjective Views," 2005 Annual meeting, July 24-27, Providence, RI 19155, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    • Handle: RePEc:ags:aaea05:19155
    DOI: 10.22004/ag.econ.19155
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    References listed on IDEAS

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