Ex ante basis risk in the live hog futures contract: Has hedgers' risk increased?
✍ Scribed by Garcia, Philip; Sanders, Dwight R.
- Publisher
- John Wiley and Sons
- Year
- 1996
- Tongue
- English
- Weight
- 977 KB
- Volume
- 16
- Category
- Article
- ISSN
- 0270-7314
No coin nor oath required. For personal study only.
✦ Synopsis
Forecasting the cash-futures basis for agricultural commodities is an important aspect of a successful marketing strategy [Bobst (1974), Garcia and Good (1983), Chicago Mercantile Exchange (19SS)l. Short hedgers are long the basis and unanticipated basis movements can adversely affect the net price received which can increase risk, and alter producer behavior [Peck (1975)l. Forecasting the basis permits producers to assess alternative forward pricing mechanisms such as futures hedging, cash forward contracts, and basis contracts. The latter two have become increasingly important as the marketing systems for agricultural commodities, particularly livestock, have become more integrated, The success of a futures contract also hinges on a predictable basis. Increased basis risk relative to price risk can reduce the attractiveness of the futures market as a risk management vehicle.
Recently, concern has been expressed over the changing nature of rn