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Hedging in Presence of Market Access Risk

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  • Tonsor, Glynn T.

Abstract

Existing literature predominantly assumes perfect knowledge of production methods when deriving optimal futures position hedging rules. This paper relaxes this assumption and recognizes situations where producers interested in hedging may not know the exact input mix that will subsequently be used in their physical operations. This uncertainty is built into a conceptual model subsequently used to demonstrate the impacts of this risk on optimal hedging behavior.

Suggested Citation

  • Tonsor, Glynn T., 2008. "Hedging in Presence of Market Access Risk," 2008 Conference, April 21-22, 2008, St. Louis, Missouri 37621, NCCC-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
  • Handle: RePEc:ags:nccest:37621
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    File URL: http://purl.umn.edu/37621
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    References listed on IDEAS

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    1. Gagnon, Louis & Lypny, Gregory J. & McCurdy, Thomas H., 1998. "Hedging foreign currency portfolios," Journal of Empirical Finance, Elsevier, vol. 5(3), pages 197-220, September.
    2. Sergio H. Lence, 1995. "The Economic Value of Minimum-Variance Hedges," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 77(2), pages 353-364.
    3. Kastens, Terry L. & Schroeder, Ted C., 1994. "Cattle Feeder Behavior And Feeder Cattle Placements," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 19(02), December.
    4. Garcia, Philip & Adam, Brian D. & Hauser, Robert J., 1994. "The Use Of Mean-Variance For Commodity Futures And Options Hedging Decisions," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 19(01), July.
    5. Taylor, Mykel R. & Dhuyvetter, Kevin C. & Kastens, Terry L., 2006. "Forecasting Crop Basis Using Historical Averages Supplemented with Current Market Information," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 31(03), December.
    6. Michael S. Haigh & Matthew T. Holt, 2000. "Hedging Multiple Price Uncertainty in International Grain Trade," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 82(4), pages 881-896.
    7. Tonsor, Glynn T. & Dhuyvetter, Kevin C. & Mintert, James R., 2004. "Improving Cattle Basis Forecasting," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 29(02), August.
    8. Chen, Gang & Roberts, Matthew C. & Thraen, Cameron S., 2006. "Managing Dairy Profit Risk Using Weather Derivatives," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 31(03), December.
    9. Lence, Sergio H., 1996. "Relaxing The Assumptions Of Minimum-Variance Hedging," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 21(01), July.
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    More about this item

    Keywords

    distiller grains; hedging; market access risk; risk management; Agricultural Finance;

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