This paper presents a manageable and effective way of nesting two popular, yet distinct approaches to obtain optimal hedging ratios - time-series econometrics (GARCH) and dynamic programming (DP). The nested DP-GARCH model is then compared to a DP-GARCH model that accounts for variability in the...

The effects of volatility of barge and ocean freight prices on prices throughout the international grain-marketing channel are analyzed using a Multivariate GARCH-M model. The model is used to infer the extent to which transportation price risk affects the level of international grain prices....

This research compares partial equilibrium and statistical time-series approaches to hedging. The finance literature stresses the former approach, while the applied economics literature has focused on the latter. We compare the out-of-sample hedging effectiveness of the two approaches when...

Various bid-ask spread estimators are applied to transaction data from LIFFE cocoa and coffee futures markets, and the resulting estimates are compared to observed actual bid-ask spreads. Results suggest that actual bid-ask spreads, which are not reported by most open-outcry futures markets, can...

Directed Acyclic Graphs (DAG's) and Error Correction Models (ECM's) are employed to analyze questions of price discovery between spatially separated commodity markets and the transportation market linking them together. Results from our analysis suggest that these markets are highly...

In settings where there is imperfect information about an underlying state of nature, but where inferences are made sequentially and are publicly observable, information cascades can lead to rational herding. Cascade phenomena may be seen in a variety of areas including technology adoption,...