The 2007 emerging corn price surge revisited – Was it expected or a large surprise?

Point forecasts are a common method to classify uncertain future outcomes. In the option price literature the concept of implied volatility is well known. This concept is used to get a forward looking indicator about the future volatility. Nowadays market expectations can be extracted in numerous ways. One of the first articles regarding this topic in the area of exchange rates and interest rates was Sölderlind and Svensson (1997). Extracting market expectations is not only focused on point forecasts. A more ambitious approach is to extract the whole possible range of market expectations out of option prices. This concept is called risk-neutral density (RND). Most agricultural markets undergo some remarkable price movements in the last 4 years. The reasons for sharp price swings in the oilseed markets are controversial discussed. This article link new econometric concepts and agricultural markets together. It broadens the understanding of market activity at a specific time period. The obtained futures price expectations map a clear picture of trading activity. The accuracy of the price expectation, an important issue for analysts and the policy, is satisfying. Areas of further work can certainly be found in the analysis of different time ranges, other product markets and exchanges.


Issue Date:
2012
Publication Type:
Conference Paper/ Presentation
PURL Identifier:
http://purl.umn.edu/123971
Page range:
3
Total Pages:
17
JEL Codes:
Q14; C53; C58; G17
Series Statement:
Reference Number 16700




 Record created 2017-04-01, last modified 2017-08-26

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