Local Polynomial Kernel Forecasts and Management of Price Risks using Futures Markets

MinKyoung Kim, Raymond M. Leuthold and Philip Garcia

No 18966, 2001 Conference, April 23-24, 2001, St. Louis, Missouri from NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management

Abstract: This study contributes to understanding price risk management through hedging strategies in a forecasting context. A relatively new forecasting method, nonparametric local polynomial kernel (LPK), is used and applied to the hog sector. The selective multiproduct hedge based on the LPK price and hedge ratio forecasts is, in general, found to be better than continuous hedge and alternative forecasting procedures in terms of reduction of variance of unhedged return. The findings indicate that combining hedging with forecasts, especially when using the LPK technique, can potentially improve price risk management.

Keywords: Marketing (search for similar items in EconPapers)
Pages: 14
Date: 2001
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Persistent link: https://EconPapers.repec.org/RePEc:ags:ncrone:18966

DOI: 10.22004/ag.econ.18966

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