IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/29593.html
   My bibliography  Save this paper

The importance of developing future contracts: a case study of Iran Agricultural Commodity Exchanges

Author

Listed:
  • Hossein-Yekani, Seyed-Ali
  • Bakhshoodeh, Mohammad

Abstract

In addition to interest in establishing local exchanges, there are growing interests in countries without futures markets to use established contracts on existing world exchanges. Cash contracts are dominant in Iran Agricultural Commodity Exchange (IACE), established recently in 2004 but cannot play relevant role of hedge for producers in agricultural markets. This paper attempts to find out either existing future contracts in the exchanges of rest of the world or establishing new future contracts are more relevant for the IACE. In this regard, we utilized the basis risk analysis to study whether or not local physical cash markets in Iran have a strong price relationship to existing futures contracts. The usefulness of making future contracts available at the IACE operators is also investigated using simulation of futures price in a Monte Carlo approach framework. The results showed that the usefulness of the particular foreign future contract (such as Tokyo Grain Exchange) in hedging domestic cash price risks is low. Either, there could be inefficiencies related to the transmission of information to the Iran agricultural markets. Furthermore, using effective risk management tools are needed for such future contracts in the IACE.

Suggested Citation

  • Hossein-Yekani, Seyed-Ali & Bakhshoodeh, Mohammad, 2006. "The importance of developing future contracts: a case study of Iran Agricultural Commodity Exchanges," MPRA Paper 29593, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:29593
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/29593/1/MPRA_paper_29593.pdf
    File Function: original version
    Download Restriction: no

    File URL: https://mpra.ub.uni-muenchen.de/34037/1/MPRA_paper_34037.pdf
    File Function: revised version
    Download Restriction: no

    References listed on IDEAS

    as
    1. Du, Wen, 2004. "International Market Integration Under Wto: Evidence In The Price Behaviors Of Chinese And Us Wheat Futures," 2004 Annual meeting, August 1-4, Denver, CO 20115, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    2. Bamba, Ibrahim & Reed, Michael R., 2004. "Monetary Policy Impacts on Cash Crop Coffee and Cocoa Using Structural Vector Error Correction Model," 2004 Annual meeting, August 1-4, Denver, CO 20056, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    3. Wei, J.Z. & Duan, J.C., 1999. "Pricing Foreign Currency and Cross-Currency Options Under GARCH," Rotman School of Management - Finance 99-01, Rotman School of Management, University of Toronto.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Basis Risk Analysis; Monte Carlo simulation approach; Futures Contract; Iran exchange;

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:29593. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter). General contact details of provider: http://edirc.repec.org/data/vfmunde.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.