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Optimal Dynamic Hedging Decisions for Grain Producers
Author(s) -
Martinez Steve W.,
Zering Kelly D.
Publication year - 1992
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.2307/1243185
Subject(s) - futures contract , hedge , position (finance) , yield (engineering) , economics , basis risk , econometrics , agricultural economics , financial economics , finance , ecology , materials science , capital asset pricing model , metallurgy , biology
The application of an optimal dynamic hedging model was explored for a county in North Carolina. Corn yield, harvest corn basis, and December corn futures prices were forecast. The forecasts were used to calculate optimal dynamic hedge positions. When the hedge position was updated infrequently, commissions were only slightly higher than commissions from a fixed hedge. Gains from updating the hedge position over the corn growing season were not substantial compared to a fixed hedge position.