Assessing the vulnerability to price spikes in agricultural commodity markets

Athanasios Triantafyllou, George Dotsis and Alexandros Sarris

Essex Finance Centre Working Papers from University of Essex, Essex Business School

Abstract: We empirically examine the predictability of the conditions which are associated with a higher probability of a price spike in agricultural commodity markets. We find that the forward spread is the most significant indicator of probable price jumps in maize, wheat and soybeans futures markets, a result which is in line with the “Theory of Storage”. We additionally show that some option-implied variables add significant predictive power when added to the more standard information variable set. Overall, the estimated probabilities of large price increases from our probit models exhibit significant correlations with the historical sudden market upheavals in agricultural markets.

Keywords: Agricultural price spikes; Tail Risk Measure; Extreme Value Theory; Risk neutral moments; Agricultural Commodities; Basis; Theory of Storage (search for similar items in EconPapers)
Date: 2019-07-02
New Economics Papers: this item is included in nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:esy:uefcwp:24921

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