The Wild Side of Commodity Markets: Hedging in Times of High Volatility

Fabio Mattos

No 413380, Cornhusker Economics from University of Nebraska-Lincoln, Department of Agricultural Economics

Abstract: Commodity markets go through periods with low volatility when we generally see small variations in prices, as well as periods with high volatility, when we tend to see large swings in prices. Regardless of the degree of price volatility in the market, producers can always use marketing contracts as a way to hedge the price risk of their operation. Even though the general mechanics of hedging are the same in periods of low volatility and high volatility, some aspects of hedging become more evident in times of high volatility. In this article, we will discuss some of these aspects focusing on hedging with futures contracts.

Keywords: Production; Economics (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:ags:nbaece:413380

DOI: 10.22004/ag.econ.413380

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