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What Drives Volatility Expectations in Grain Markets?

Author

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  • Adjemian, Michael K.
  • Bruno, Valentina G.
  • Robe, Michel A.

Abstract

We analyze empirically the drivers of grain option-implied volatilities (IVs). Forward-looking uncertainty and risk aversion in equity market (jointly captured by the VIX) and the state of commodity inventories (proxied by the net cost of carry for each grain) have significant impacts on forward-looking volatility in the three largest U.S. agricultural markets: corn, soybeans, and wheat. We also find some evidence that financial speculation has an immediate but short-lived negative impact on grain Ivs.

Suggested Citation

  • Adjemian, Michael K. & Bruno, Valentina G. & Robe, Michel A., 2016. "What Drives Volatility Expectations in Grain Markets?," 2016 Conference, April 18-19, 2016, St. Louis, Missouri 285861, NCR-134/ NCCC-134 Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    • Handle: RePEc:ags:n13416:285861
    DOI: 10.22004/ag.econ.285861
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    References listed on IDEAS

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    Cited by:

    1. Goswami, Alankrita & Karali, Berna, 2019. "Does a Nexus Exist between Implied Volatility and Storage Regimes in Agricultural Commodities?," 2019 Conference, April 15-16, 2019, Minneapolis, Minnesota 309627, NCR-134/ NCCC-134 Applied Commodity Price Analysis, Forecasting, and Market Risk Management.

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