The management of price risk in Iranian dates: An application of futures instruments

Habibeh Sherafatmand and Saeed Yazdani

Cogent Economics & Finance, 2014, vol. 2, issue 1, 1-12

Abstract: Effective risk management is an important aspect of farming. Risk management involves choosing among alternatives that reduce the financial effects of the uncertainties of weather, yields, prices, government policies, and other factors that can cause wide swings in farm income. To deal with price uncertainty, this paper focuses on futures markets and calculates hedge ratio for dates. A bivariate BEKK GARCH model is used to determine time-varying hedge ratios. The results show that the average BEKK BGARCH hedge ratio for dates is .7. Also in this paper, the hedge ratio, which takes into consideration the producers' risk-averse parameter, is estimated [Extended mean Gini hedge ratio (EMGHR)]. Results of EMGHR recommended that risk-averse producers, who have risky parameter equal to 50, could reduce their price risk to 60% by attending futures markets.

Date: 2014
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DOI: 10.1080/23322039.2014.946998

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