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USING PRIVATE RISK MANAGEMENT INSTRUMENTS TO MANAGE COUNTER-CYCLICAL PAYMENT RISKS UNDER THE NEW FARM BILL

John D. Anderson, Keith Coble () and J. Corey Miller

No 18975, 2003 Conference, April 21-22, 2003, St. Louis, Missouri from NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management

Abstract: This research evaluates whether or not hedging strategies using call options on the New York Board of Trade cotton futures can be effectively used to protect the new counter-cyclical payment on cotton. Results indicate that some level of counter-cyclical payment hedging is optimal for risk averse decision makers. Optimal hedge ratios depend on planting time expectations of the marketing year average price as well as on what crop, if any, has been planted on the base acres receiving the counter-cyclical payment.

Keywords: Marketing; Risk and Uncertainty (search for similar items in EconPapers)
Pages: 19
Date: 2003
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Persistent link: https://EconPapers.repec.org/RePEc:ags:ncrthr:18975

DOI: 10.22004/ag.econ.18975

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