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Risk Measurement and Supply Response in the Soybean Complex

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  • Diersen, Matthew A.
  • Garcia, Philip

Abstract

Output price risk has been found to affect firm behavior in the soybean complex. Here, we investigate the influence of price risk on the supply of soybean products, using futures prices and implied volatilities from options markets to generate the first and second moments of the crushers' returns distribution. Our findings suggest that implied volatilities can be a useful measure of price risk in a supply response context. This measure has the advantages of being forward-looking, market generated, and relatively easily implementable for those commodities with futures and options markets.

Suggested Citation

Handle: RePEc:ags:nc8191:285723
DOI: 10.22004/ag.econ.285723
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