Open AccessCoffee prices behavior in the Indonesian market and its implication to derivatives pricing
Author(s) -
Nikenasih Binatari,
Asep Ediana Latip
Publication year - 2019
Publication title -
journal of physics. conference series
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.21
H-Index - 85
eISSN - 1742-6596
pISSN - 1742-6588
DOI - 10.1088/1742-6596/1320/1/012023
Subject(s) - indonesian , futures contract , derivatives market , spot market , hedge , volatility (finance) , derivative (finance) , spot contract , economics , commodity , futures market , price risk , market price , forward contract , financial economics , commodity market , business , microeconomics , market economy , electricity , ecology , philosophy , linguistics , finance , electrical engineering , biology , engineering
Indonesia is one of the main producers of agricultural commodities including coffee. Whereas the physical market of coffee in Indonesia, as a commodity, has been existed for centuries, the derivative market of coffee has just begun to appear recently as the result of demand growth for local market and export purpose. The paper market emerges as the outcome of the need of the producers, suppliers, and buyers to hedge against the risk of the availability and the prices volatility of coffee. In this growing commodity derivative market, it is important to examine the regular pattern and behavior of the coffee price for pricing purpose of its derivatives, especially in the specific case for the Indonesian market. This paper analyses the spot, futures, and option of coffee in Indonesia. The coffee spot price process is presented along with the parameters and its implication to derivatives pricing.