Since 2014
Price Uncertainty and Optimal Hedging in the Agricultural Market
Transylvanian Review of Administrative Sciences
View Archive Info| Field | Value | |
| Title |
Price Uncertainty and Optimal Hedging in the Agricultural Market
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| Creator |
ISTUDOR, Nicolae; Professor, Department of Agrifood and Environmental Economics, Agrifood and Environmental Economics Faculty, The Bucharest Academy of Economic Studies, Bucharest, Romania ARMEANU, Dan; Professor, Department of Finance, Faculty of Finance, Insurance, Banking and Stock Exchange, The Bucharest Academy of Economic Studies, Bucharest, Romania SGARDEA, Florinel Marian; Professor, Department of Accounting and Audit, Faculty of Accounting and Management Information Systems, The Bucharest Academy of Economic Studies, Bucharest, Romania DINICĂ, Mihai-Cristian; PhD, Department, of Finance, Faculty of Finance, Insurance, Banking and Stock Exchange, The Bucharest Academy of Economic Studies, Bucharest, Romania |
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| Subject |
price uncertainty; hedging; agricultural commodity prices; futures price; volatility.
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| Description |
The increased volatility of the agricultural prices has detrimental effects on the economic welfare and raises concerns regarding poverty and malnutrition at a global level. Financial risk management can be an efficient solution for limiting the effects of international agricultural price volatility. The paper analyzes the behavior of the U.S. wheat and corn prices, emphasizing their highly volatile and unpredictable nature. Given the existence of the basis risk, the estimation of the optimal hedge ratio is needed in order to provide an efficient hedging strategy against price risks. The role of public authorities in this context can consist in promoting education in the fields of hedging and understanding the agricultural price volatility risk. We estimate static and time varying optimal hedge ratios for wheat and corn through several methods. Based on the out of sample hedging effectiveness given by the variance reduction, the methods are compared and the results show that the time varying hedge ratios estimated through rolling window OLS and GARCH methods outperform the static counterparts.
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| Publisher |
Babes Bolyai University
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| Contributor |
Acknowledgment: This work was cofi nanced from the European Social Fund through Sectorial Operational Programme Human Resources Development 2007-2013, project number POSDRU/107/1.5/S/77213, ‘Ph.D. for a career in interdisciplinary economic research at the
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| Date |
2014-06-09
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| Type |
info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion Peer-reviewed Article |
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| Format |
application/pdf
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| Identifier |
http://rtsa.ro/tras/index.php/tras/article/view/19
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| Source |
Transylvanian Review of Administrative Sciences; 2014: Issue No. 42 E/June; 32-48
18422845 |
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| Language |
eng
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| Relation |
http://rtsa.ro/tras/index.php/tras/article/view/19/16
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| Rights |
Copyright (c) 2014 Transylvanian Review of Administrative Sciences
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