Since 2014
Optimal Multiple Crop Price Hedging: Robust Estimates Under Yield/Basis Risk
International Business & Economics Research Journal
View Archive Info| Field | Value | |
| Title |
Optimal Multiple Crop Price Hedging: Robust Estimates Under Yield/Basis Risk
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| Creator |
Fewings, David R.
Pekoz, Erol A. |
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| Description |
This paper examines how commodity futures can optimally be used by farmers to reduce exposure to price risk in the presence of production uncertainty. The multiple-crop hedging problem is modeled under conditions of price risk, production risk, and basis risk. The results are of general significance for producers with concave utility functions of expected wealth.Optimal hedges are obtained that are quantitatively robust for different wealth levels and for variations in utility functions spanning the plausible range from decreasing to increasing relative risk aversion and for relative risk aversion coefficients of any plausible value.Extensions to the existing literature include a closed form solution that provides robust estimates of optimal hedging strategy for the multiple crop hedging problem under uncertain yields, estimation of the optimal hedge variation as a function of distance from the geographical center of crop production, and optimal hedge estimates for state average crop mixes by state for forty-two states.
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| Publisher |
The Clute Institute
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| Date |
2011-02-25
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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 |
https://www.cluteinstitute.com/ojs/index.php/IBER/article/view/3766
10.19030/iber.v2i2.3766 |
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| Source |
International Business & Economics Research Journal (IBER); Vol 2 No 2 (2003)
2157-9393 1535-0754 10.19030/iber.v2i2 |
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| Language |
eng
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| Relation |
https://www.cluteinstitute.com/ojs/index.php/IBER/article/view/3766/3809
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