Reliability of soybean and corn option-based probability assessments

✍ Scribed by Elvira Maria de Sousa Silva; Kandice H. Kahl

• Publisher: John Wiley and Sons
• Year: 1993
• Tongue: English
• Weight: 683 KB
• Volume: 13
• Category: Article
• ISSN: 0270-7314
• DOI: 10.1002/fut.3990130705

✦ Synopsis

CCC 0270-7314/93/070765-15 'European options can be exercised only at the maturity date. American options can be exercised at any time during the life of the option. 21n an earlier article, Fackler and King (1987) analyzed the reliability of cattle and soybean probability assessments during the early years of option trading (February, 1985 to February, 1987 for cattle and March, 1985 to January, 1986 for soybeans). Probability assessments were derived assuming lognormality, assuming the Burr-12 distribution, and making no assumption about the distributional form. They found that the probability assessments from the three methods generally differed by only a few percentage points. They also found problems in assessing the probabilities for soybeans but no problems for cattle. However, they indicated that their conclusions were preliminary given their small data set caused by the recent introduction of trading in agricultural options.