Commodity and freight futures contracts are analyzed for their effectiveness in reducing uncertainty for international traders. A theoretical model is developed for a trader exposed to several types of risk. OLS hedge ratio estimation is compared to the SUR and the multivariate GARCH...

In many studies the assumption is made that traders only encounter one type of price risk. In reality, however, traders are exposed to multiple price risks, and often have several relevant derivative instruments available with which to hedge price uncertainty. In this study, commodity, foreign...

This paper presents an effective way of combining two popular, yet distinct approaches used in the hedging literature dynamic programming (DP) and time-series (GARCH) econometrics. Theoretically consistent yet realistic and tractable models are developed for traders interested in hedging a...

This paper presents an effective way of combining two distinct approaches used in the hedging literature--dynamic programming (DP) and time-series (GARCH) econometrics. Theoretically consistent yet realistic and tractable models are developed for traders interested in hedging a portfolio....

Foreign exchange hedging ratios are simultaneously estimated alongside freight and commodity ratios in a time-varying portfolio framework. Foreign exchange futures are found to be by far the most important derivative instrument to be employed in order to reduce uncertainty for traders. Our...

Crude oil, heating oil, and unleaded gasoline futures contracts are simultaneously analysed for their effectiveness in reducing price volatility for an energy trader. A conceptual model is developed for a trader hedging the 'crack spread'. Various hedge ratio estimation techniques are compared...

In many studies the assumption is made that traders only encounter one type of price risk. In reality, however, traders are exposed to multiple price risks, and often have several relevant derivative instruments available with which to hedge price uncertainty. In this study, commodity, foreign...

Foreign exchange hedging ratios are simultaneously estimated alongside freight and commodity ratios in a time‐varying portfolio framework. Foreign exchange futures are by far the most important derivative instrument used to reduce uncertainty for traders. Our results lend support to the...

Issues of recent interest and controversy regarding bid-ask spreads in commodity futures markets are investigated. First, competing spread estimators are applied to open outcry transactions data and resulting estimates are compared to observed spreads. This enables market microstructure...

This study examines the effect of the recent radical agricultural liberalization policy, i.e. the 1996 FAIR Act, on agricultural commodity price volatility using Generalized Autoregressive Conditional Heteroscedasticity (GARCH) models. Results of the study indicate that the agricultural...