Comparison of Some Static Hedging Models of Agricultural Commodities Price Uncertainty

Jules Sadefo-Kamdem and Zoulkiflou Moumouni
Additional contact information
Jules Sadefo-Kamdem: MRE - Montpellier Recherche en Economie - UM - Université de Montpellier
Zoulkiflou Moumouni: MRE - Montpellier Recherche en Economie - UM - Université de Montpellier
Authors registered in the RePEc Author Service: Jules SADEFO KAMDEM

Post-Print from HAL

Abstract: In static framework, many hedging strategies can be settled following the various hedge ratios that have been developed in the literature. However, it is difficult to choose among them the best the appropriate strategy according the to preference or economic behavior of the decision-maker such as prudence and temperance. This is so even with the hedging effectiveness measure. After introducing a hedging ratio that take into account the prudence and temperance of the decision maker, we propose a ranking based approach to measure the effectiveness using L-moment to classify hedge portfolios, hence hedge ratios, with regard to their performance. Moreover, we deal with the hedging issue in presence of quantity and rollover risks and derive an optimal strategy that depends upon the basis and insurance contract. Such hedging issue includes the relevant risks encountered in practice and we relate how insurance contract, specially designed for production risk could affect the futures hedge. The application on some agricultural futures prices data at hands shows that taking into account quantity and rollover risks leads to better hedging strategy based on the L-performance effectiveness measure.

Keywords: Agriculture; Risk management; Futures markets; Commodities; Risk aversion (search for similar items in EconPapers)
Date: 2020-05-14
References: Add references at CitEc
Citations:

Published in Journal of Quantitative Economics, 2020, 18 (3), pp.631-655. ⟨10.1007/s40953-020-00206-y⟩

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Journal Article: Comparison of Some Static Hedging Models of Agricultural Commodities Price Uncertainty (2020)
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:hal:journl:hal-02920323

DOI: 10.1007/s40953-020-00206-y

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().