STOCHASTIC DOMINANCE ANALYSIS OF FUTURES AND OPTION STRATEGIES FOR HEDGING FEEDER CATTLE

Stochastic simulation and generalized stochastic dominance are used to compare the risk-return properties of the Chicago Mercantile Exchange feeder cattle futures contract with those of the feeder cattle put option contract. Cash marketing, futures, and option strategies are analyzed for four backgrounding systems common to the mid-south region of the United States. The results show that at-the-money put option strategies dominate corresponding futures contract strategies according to generalized stochastic dominance. This implies that at-the-money put option contracts are superior to feeder cattle futures contracts for risk-averse backgrounders in the mid-south region of the United States.


Issue Date:
1998-10
Publication Type:
Journal Article
DOI and Other Identifiers:
Record Identifier:
https://ageconsearch.umn.edu/record/31533
PURL Identifier:
http://purl.umn.edu/31533
Published in:
Agricultural and Resource Economics Review, 27, 2
Page range:
270-280
Total Pages:
11




 Record created 2017-04-01, last modified 2019-08-26

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