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,...

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...

This is a potpourri of price analyses involving developed, developing and transition economies. Papers included in this session: Dynamics of Polish Wheat Prices in Comparison to Selected World Prices in a Period of Economic Transformation, Szczepan Figiel, Olsztyn University of Agriculture and...

Using directed acyclic graphs (DAGs) and error correction models, we study the dynamics of freight prices that comprise the Baltic Panamax Index (BPI), the index on which freight futures trading was based. The DAGs are used to make statements about the contemporaneous correlations between prices...

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...

This paper addresses several questions surrounding volatility forecasting and its use in the estimation of optimal hedging ratios. Specifically: Are there economic gains by nesting time-series econometric models (GARCH) and dynamic programming models (therefore forecasting volatility several...

Previous empirical studies of information cascades have used either naturally occurring data or laboratory experiments. We combine attractive elements from each of these lines of research by observing market professionals from the Chicago Board of Trade (CBOT) in a controlled environment....

This paper looks at the potential role of time-varying volatility of Mississippi river barge and ocean freight prices on commodity prices in Illinois, at the US Gulf and in Rotterdam using a Vector Error Correction GARCH-in-Mean model. The model is used to infer the extent to which...

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...