Futures spread risk in soybean multiyear hedge-to-arrive contracts
✍ Scribed by E. Neal Blue; Marvin L. Hayenga; Sergio H. Lence; E. Dean Baldwin
- Publisher
- John Wiley and Sons
- Year
- 1998
- Tongue
- English
- Weight
- 94 KB
- Volume
- 14
- Category
- Article
- ISSN
- 0742-4477
No coin nor oath required. For personal study only.
✦ Synopsis
Soybean futures spreads in the 1948 -1997 period are evaluated for the associated monetary risks inherent in multiyear hedge-to-arrive contracts (HTAs). For all years, the probability of having a negative old crop-new crop spread is approximately 75%. However, the highprice years have a 100% probability of having a negative spread and a 50-60% probability of having a negative spread exceeding 10 percent. The spread risk in high price years makes a multiyear HTA an imprecise hedge. Thus, establishing new crop prices close to current futures prices by initially using old crop futures is unlikely.