Relaxing Standard Hedging Assumptions in the Presence of Downside Risk

The purpose of this study is to analyze how the introduction of a downside risk measure and less restrictive assumptions can change the optimal hedge ratio in the standard hedging problem. Based on a dataset of futures and cash prices for soybeans in the U.S., the empirical findings indicate that optimal hedge ratios change dramatically when a one-sided risk measure is adopted and standard assumptions are relaxed. Further, the results suggest that in a downside risk framework with realistic hedging assumptions there is little or no incentive for farmers to hedge.


Subject(s):
Issue Date:
2005
Publication Type:
Conference Paper/ Presentation
PURL Identifier:
http://purl.umn.edu/19040
Total Pages:
14
Series Statement:
2005 Conference, St. Louis, MO, April 18-19, 2005




 Record created 2017-04-01, last modified 2017-08-24

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