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Using Private Risk Management Instruments To Manage Counter-Cyclical Payment Risks Under The New Farm Bill

Listed author(s):
  • Anderson, John D.
  • Coble, Keith H.
  • Miller, J. Corey

This research evaluates whether or not hedging strategies using call options on the New York Board of Trade cotton futures can be effectively used to protect the new counter-cyclical payment on cotton. Results indicate that some level of counter-cyclical payment hedging is optimal for risk averse decision makers. Optimal hedge ratios depend on planting time expectations of the marketing year average price as well as on what crop, if any, has been planted on the base acres receiving the counter-cyclical payment.

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Paper provided by NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management in its series 2003 Conference, April 21-22, 2003, St. Louis, Missouri with number 18975.

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Date of creation: 2003
Handle: RePEc:ags:ncrthr:18975
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