Valuing switching options in international grain marketing

Stephan Johansen and William Wilson

Agribusiness, 2019, vol. 35, issue 3, 423-438

Abstract: An important strategy for commodity trading firms is geographical diversification through acquisitions and greenfield development, often justified with the quest for multiple origins. This strategy can be interpreted as a “switching option” which tend to be undervalued using traditional valuation techniques. This paper develops a stochastic binomial real options model to value networks of export elevators. It is applied to soybean trading for shipments from ports in the United States, Brazil, and Ukraine. The paper estimates the value of the option of being able to switch origins in export trade. This option value is substantial and is determined partly by margin distributions and correlations among these.

Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1002/agr.21593

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:agribz:v:35:y:2019:i:3:p:423-438

Access Statistics for this article

Agribusiness is currently edited by Ronald W. Cotterill

More articles in Agribusiness from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley Content Delivery ().