Author: Ge Zhao
Publisher:
ISBN:
Category : Commodity exchanges
Languages : en
Pages : 226

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Author: Shi Wei
Publisher:
ISBN: 9780549126591
Category :
Languages : en
Pages : 114

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Book Description
This dissertation consists of three papers on risk management with empirical applications for commodity markets. The first two papers analyze selective hedging, where risk managers have views on future market conditions and sometimes hedge selectively based on these views. I develop two Bayesian optimal hedging models based on the Bayesian portfolio optimization framework. The Bayesian approach is chosen because it jointly considers subjective views and parameter estimation risk. The first paper considers only subjective views and estimation risk regarding the expectation vector of asset returns, while the second paper extends the framework to the covariance matrix of asset returns. Numerical examples in these studies show that subjective views can have a substantial impact on risk managers' hedging decisions and that the impact is most evident when the hedger speculates on market price direction and/or is pessimistic about the effectiveness of hedging, i.e., a breakdown in the correlation among different markets. Overall, the Bayesian optimal hedging models not only help explain the large cross-sectional and time-series variation in hedging positions often observed in practice, but also provide risk managers with a theoretically intuitive yet quantitatively rigorous tool to blend their views on market conditions with a "market-wide" or "firm-wide" consensus in determining optimal hedging positions. The third paper estimates the cost (i.e., risk premium) of pre-harvest forward contracting for wheat in Illinois and Kansas. Given the similarities between forward and futures markets, regression models used for testing the risk premium hypothesis in futures markets are applied to forward markets. Cost is estimated for both unconditional and conditional levels. The empirical results show that the average cost of forward contracting is higher than that of futures hedging in both states and cost varies systematically in relation to the level and volatility of forward prices.

Author: Mathias Gerner
Publisher:
ISBN:
Category :
Languages : en
Pages : 115

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Author: Ying Wang
Publisher:
ISBN:
Category :
Languages : en
Pages : 118

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Book Description
Funding risk, which caused the $1.3 billion derivatives-related loss at MG Refining & Marketing, Inc. in 1993, has long been overlooked in the risk management literature. The key to understanding funding risk is that, as futures hedging practice requires substantial infusions of cash to meet variation margin calls, the maximum margin required may occur well before the expiration of the futures contract, but must be met in order to maintain the futures positions. This paper approaches the question of how to properly measure the "funding risk" of commodity futures positions by estimating a CD-Vine copula model for the dependence of corn, soybean and wheat futures at multiple forecast intervals, using Harrison’s method and the Extreme Value Theory to calibrate the distribution of the maximum. This is the first attempt in the literature to model the extreme prices of futures contracts over a given time period in an agricultural commodity portfolio context. The adoption of the recently-developed CD-Vine copula model allows one to model the dependence structure in a more flexible manner than the previous standard multivariate models based on Gaussian or Student’s t distributions.

Author: Satya Ranjan Sahoo
Publisher:
ISBN:
Category :
Languages : en
Pages : 0

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Author: Satya R. Sahoo
Publisher:
ISBN:
Category :
Languages : en
Pages :

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Author: Geoffrey Poitras
Publisher: Routledge
ISBN: 1136262601
Category : Business & Economics
Languages : en
Pages : 426

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Book Description
Commodity Risk Management goes beyond just an introductory treatment of derivative securities, dealing with more advanced topics and approaching the subject matter from a unique perspective. At its core lies the concept that commodity risk management decisions require an in-depth understanding of speculative strategies, and vice versa. The book offers readers a unified treatment of important concepts and techniques that are useful in applying derivative securities in the management of risk in commodity markets. While some of these techniques are well known and fairly common, Poitras offers applications to specific situations and links to speculative trading strategies - extensions of the material that not only are hard to come by, but helpful to both the academic and the practitioner. The book is divided into three parts. The first part deals with the general framework for commodity risk management, the second part focuses on the use of derivative security contracts in commodity risk management, and the third part deals with applications to three specific situations. As a textbook, this book is designed to appeal to classes at a senior undergraduate/MBA/MA levelof training in Finance, financial economics, actuarial science, management science, agriculturaleconomics and accounting. There will also be interest for the book as: a monograph for research libraries, a handbook for individuals working in the commodity risk management industry, and a guidebook for those in the general public interested in topics like farm risk management or the assessment of hedging practices of publicly-traded commodity producers.

Author: Rui Zhu
Publisher:
ISBN:
Category :
Languages : en
Pages : 236

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Book Description
This dissertation addresses issues in corporate risk management. Part I examines the determinants for corporate decisions to commodity hedge and to the extent of hedging. Chapter 1 discusses prior literature, including theory and empirical evidence on corporate risk management. It provides the background to support the empirical analyses of Chapters 2, 3 and 4. Chapter 2 examines corporate decisions to commodity hedge. I find that firms are more likely to hedge when they are big, have risk management department set up and have more of their competitors hedge. Chapter 3 investigates what determines the extent of hedging conditional on hedging decisions and the cross-sectional and time series deviation of the hedge ratio. I find that firms tend to hedge less when they have younger CEOs and have more options in their compensation plan. I also find that when determining the hedge ratio, firms with young CEOs and higher option compensation tend to respond to past commodity price growth and to deviate from industry average. Part II investigates the relationship between corporate risk management and product market competition. Chapter 4 examines the different product market performance for firms with different hedging polices after commodity price shocks. I find that unhedged firms which are ex ante financially constrained lose market share and experience a decreased profitability during and after commodity price shocks. Chapter 5 examines whether the loss of unhedged constrained firms in product market is driven by the competitors. I find that firms with financial advantages--unconstrained hedged firms--tend to increase advertising expenditures and decrease price-cost-margins during negative commodity shocks, indicating that the market share loss of constrained unhedged firms is due to increased competition in the product market. Chapter 6 examines whether corporate risk management affects the likelihood of firms exiting the market. I find that constrained unhedged firms are 6% more likely to exit the market than their unconstrained hedged rivals and the effects are stronger in concentrated industries and industries with higher leverage dispersion.

Author: Michael Bierbrauer
Publisher:
ISBN:
Category :
Languages : en
Pages : 151

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Author: James Ian Vickery
Publisher:
ISBN:
Category :
Languages : en
Pages : 158

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Book Description
(Cont.) Risk Management have begun implementing strategies to provide commodity price and weather insurance in the developing world. In Chapter 3 (joint with Professor Rob Townsend from the University of Chicago), we examine how shocks to the price of rubber, an important but volatile Thai export commodity, affect the income, consumption and intra-household remittances of rural Thai households. In contrast to related work on rainfall shocks, we find rubber price innovations are not well insured or smoothed--remittances, borrowing and saving play only small roles in ameliorating the effect of these shocks on the consumption of affected households. We argue that differences in the relative persistence of the two types of shocks provide a plausible reason for these divergent findings, drawing on the literature on buffer stock models of consumption behavior and risk sharing with limited commitment.