position hedging rules. This paper relaxes this assumption and recognizes situations where producers interested in hedging may … conceptual model subsequently used to demonstrate the impacts of this risk on optimal hedging behavior. …

Hedging effectiveness is the proportion of price risk removed through hedging. Empirical hedging studies typically … estimate a set of risk minimizing hedge ratios, estimate the hedging effectiveness statistic, apply the estimated hedge ratios … to a second group of data, and examine the robustness of the hedging strategy by comparing the hedging effectiveness for …

This study focuses on hedging effectiveness defined as the proportionate price risk reduction created by hedging. By … overstate the amount of price risk reduction that can be achieved by hedging, (b) the properly computed hedging effectiveness in … the hedge ratio regression will also generally overstate the amount of risk reduction that can be achieved by hedging, (c …

hedging methodology is applied to weekly cash and futures price data from March 23, 2005 through March 7, 2007. Findings … include (1) for two- to eight-week hedging horizons, the ethanol futures contract effectively hedges ethanol inventory price … risk. The effectiveness of the hedge increases with the hedging horizon. Thus, ethanol producers and brokers can use the …