Options trading in agricultural futures markets: A reasonable instrument of risk hedging, or a driver of agricultural price volatility?
Thomas Glauben (),
Bernhard Brümmer and
No 20e, IAMO Policy Briefs from Leibniz Institute of Agricultural Development in Transition Economies (IAMO)
Options trading is increasingly important in more volatile agricultural markets. Options allow for unilateral hedging of price risks, e. g. against falling prices only, and are an indispensable risk management instrument for farmers and grain dealers. Concerns that soaring options trading could spark incremental volatility of international agricultural commodity prices have not been empirically verified to date. Econometric assessments for the MATIF grain maize market suggest that option trading does not have a volatility increasing effect.
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Working Paper: Options trading in agricultural futures markets: A reasonable instrument of risk hedging, or a driver of agricultural price volatility? (2014)
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