Risk Aversion and the Recommended Hedging Ratio

Gary E. Bond and Stanley Thompson ()

American Journal of Agricultural Economics, 1985, vol. 67, issue 4, 870-872

Abstract: Individual risk preferences can have important implications for commodity hedging decisions. Existing literature suggests that when cash and futures positions are treated as endogenous, the optimal hedge ratio is independent of the risk parameter. Under similar conditions we demonstrate that the existence of nonlinear transaction or storage costs makes the decision maker's attitude toward risk a relevant determinant of the size of the optimal hedge ratio.

Date: 1985
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Persistent link: https://EconPapers.repec.org/RePEc:oup:ajagec:v:67:y:1985:i:4:p:870-872.

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