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Design and Pricing of Short Term Hog Marketing Contracts

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  • Unterschultz, James
  • Novak, Frank
  • Bresee, Donald

Abstract

Risk research has not addressed the theoretical and empirical implications of window contracts in the hog industry. Short term window contracts are modeled here as portfolios of puts and calls. A confidence interval approach and a break even approach are used to determine the price window. An empirical simulation found that the price window varied with market conditions. No one window strategy evaluated here stood out as superior in all risk measurement criteria: increased mean revenues, lowered standard deviation of revenues, reduced frequency of large losses and reduced maximum loss.

Suggested Citation

  • Unterschultz, James & Novak, Frank & Bresee, Donald, 1997. "Design and Pricing of Short Term Hog Marketing Contracts," 1981-1999 Conference Archive 285698, NCR-134/ NCCC-134 Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    • Handle: RePEc:ags:nc8191:285698
    DOI: 10.22004/ag.econ.285698
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