The Optimal Wheat Futures Hedge at the Euronext Paris from a Farmer’s Perspective

2020 ◽  
Vol 69 (1) ◽  
pp. 49-63
Author(s):  
Teresa Vollmer
Keyword(s):  
Commodity Prices ◽  
Futures Market ◽  
Futures Contracts ◽  
Risk Minimization ◽  
Price Shocks ◽  
Market Participants ◽  
Hedge Ratios ◽  
Optimal Dynamic ◽  
One Year ◽  
The Cost

Futures contracts are extensively used by commer-cial market participants to hedge commodities against the risk of adverse price fluctuations. But although farmers have faced increased volatility in commodity prices in recent years, only very few of them actively use hedging as a risk management instrument. In this article we analyze the hedging potential of the Euronext milling wheat futures market for German farmers based on the estimation of optimal static as well as optimal dynamic hedge ratios. We find that both hedging approximately one year and half a year before harvesting leads to a reduction in the variance of returns compared with unhedged portfolios. But this risk minimization is achieved at the cost of lower returns on average. In addition we find that margin calls might be one of the reasons why so few farmers hedge since they cause liquidity problems especially in marketing years with unanticipated price shocks.

scholarly journals Empirical Evidence on Time-Varying Hedging Effectiveness of Emissions Allowances under Departures from the Cost-of-Carry Theory

2013 ◽  
Vol 2013 ◽  
pp. 1-8 ◽  
Author(s):  
Kai Chang
Keyword(s):  
Futures Market ◽  
Time Varying ◽  
Conditional Volatility ◽  
Conditional Correlation ◽  
Spot Prices ◽  
Market Participants ◽  
Hedging Effectiveness ◽  
Hedge Ratios ◽  
Cost Of Carry ◽  
The Cost

Under departures from the cost-of-carry theory, traded spot prices and conditional volatility disturbed from futures market have significant impacts on futures price of emissions allowances, and then we propose time-varying hedge ratios and hedging effectiveness estimation using ECM-GARCH model. Our empirical results show that conditional variance, conditional covariance, and their correlation between between spot and futures prices exhibit time-varying trends. Conditional volatility of spot prices, conditional volatility disturbed from futures market, and conditional correlation of market noises implied from spot and futures markets have significant effects on time-varying hedge ratios and hedging effectiveness. In the immature emissions allowances market, market participants optimize portfolio sizes between spot and futures assets using historical market information and then achieve higher risk reduction of assets portfolio revenues; accordingly, we can obtain better hedging effectiveness through time-varying hedge ratios with departures from the cost-of-carry theory.

scholarly journals Are bitcoin futures contracts for hedging or speculation?

2020 ◽  
Vol 17 (3) ◽  
pp. 1-9
Author(s):  
Ramzi Nekhili
Keyword(s):  
Trading Volume ◽  
Futures Market ◽  
Futures Contracts ◽  
Risk Minimization ◽  
Full Sample ◽  
Market Participants ◽  
Hedging Effectiveness ◽  
Informed Traders ◽  
Increasing Demand ◽  
Robustness Check

The emerging interest in Bitcoin futures market has led to questions on its trading form and contribution to risk minimization. These questions are important for market participants, including hedgers and speculators. This paper addresses the possible trading motive in Bitcoin futures market in being speculation or hedging. The author first tests a model relating Bitcoin futures returns with trading volume and conditional volatility, estimated with a GJR-GARCH specification, on a full sample of daily futures prices. A robustness check is then conducted by investigating the hedging effectiveness of Bitcoin futures and the speculation-hedging ratios on individual Bitcoin futures contracts. The estimation results on Bitcoin futures contracts, spanning from December 2017 to February 2020, show a significant positive relationship between futures returns and lagged volume. The speculation-hedging measures used for Bitcoin futures contracts maturing in March, June, September, and December reveal an increasing demand for speculation. Also, the Bitcoin spot’s full-hedge and OLS-hedge strategies with Bitcoin futures provide no gain over a no-hedge strategy. The results reveal strong evidence that traders in the Bitcoin futures market are motivated by speculation rather than hedging. This further puts in evidence the existence of asymmetric information within informed traders in Bitcoin futures market, and therefore market participants would not insure their positions against Bitcoin price movements.

scholarly journals RESEARCH ON FUTURES TREND TRADING STRATEGY BASED ON SHORT TERM CHART PATTERN

2012 ◽  
Vol 13 (5) ◽  
pp. 915-930 ◽  
Author(s):  
Saulius Masteika ◽  
Aleksandras Vytautas Rutkauskas
Keyword(s):  
Historical Data ◽  
Decision Support Tool ◽  
Technical Analysis ◽  
Futures Market ◽  
Trading Strategy ◽  
Futures Contracts ◽  
Main Task ◽  
Short Term ◽  
Support Tool ◽  
Market Participants

The main task of this paper is to examine a short term trend trading strategy in futures market based on chart pattern recognition, time series and computational analysis. Specifications of historical data for technical analysis and equations for futures profitability calculations together with position size measurement are also discussed in the paper. A contribution of this paper lies in a novel chart pattern related to fractal formation and chaos theory and its application to short term up-trend trading. Trading strategy was tested with historical data of the most active futures contracts. The results have given significantly better and stable returns compared to the change of market benchmark (CRB index). The results of experimental research related to the size of trading portfolio and trade execution slippage are also discussed in the paper. The proposed strategy can be attractive for futures market participants and be applied as a decision support tool in technical analysis.

Theory and Evidence of Arbitrage Trading of Equity Futures

2010 ◽  
Vol 18 (4) ◽  
pp. 69-108
Author(s):  
Jin Yoo ◽  
Geun Beom Kim
Keyword(s):  
Stock Market ◽  
Futures Market ◽  
Futures Contracts ◽  
Spot Price ◽  
Market Participants ◽  
Arbitrage Opportunities ◽  
Time Period ◽  
Arbitrage Trading ◽  
Arbitrage Opportunity ◽  
First Time

The equity futures market was opened in May 6th, 2008 for the first time in Korea but nonetheless it has rarely been researched since. In this paper, we examine whether the market, combined with the stock market, its underlying market, has been offering any arbitrage opportunities to market participants for the period of May 6th, 2008 to March 11, 2010, focusing on the two futures contracts of Samsung Electronics and Hyundai Motors, the two most actively traded ones. Our findings are as follows. First, there have been arbitrage opportunities for the two futures in either direction. Second, the average time period for an arbitrage opportunity was two seconds so arbitrage transactions were feasible indeed. Third, nevertheless, some arbitrage transactions ended up with a loss because the estimated spot price at maturity to carry out an arbitrage trading turned out to be significantly different from the realized one. The discrepancy in these two prices causes a seemingly very safe arbitrage trading a risky one. This risky feature of an arbitrage trading has never been addressed in depth in a paper or a book before, and is a major contribution of this paper.

scholarly journals THE COST OF FORWARD CONTRACTING IN THE CIF NOLA EXPORT BID MARKET

2019 ◽  
Vol 51 (1) ◽  
pp. 164-181 ◽  
Author(s):  
ANDREW M. MCKENZIE ◽  
BRADLEY J. ISBELL ◽  
B. WADE BRORSEN
Keyword(s):  
Risk Premium ◽  
Futures Market ◽  
Market Analysis ◽  
Forward Contracts ◽  
Market Participants ◽  
Forward Market ◽  
Contractual Obligations ◽  
The Cost ◽  
Forward Contracting

AbstractThe CIF NOLA “river market” represents an important but opaque forward market that serves Gulf exporters and elevators. CIF NOLA bids function similarly to traditional forward contracts; however, like a futures market, firms can offset their forward contractual obligations by offsetting positions in a liquid off-exchange paper market. Analysis shows grain sellers pay a risk premium for fall harvest delivery contracts. However, outside of fall harvest, contract liquidity, coupled with a good institutional balance of long and short market participants, mostly removes the pricing bias commonly found in farmer forward contracting in corn and soybeans.

Sonographically guided, transcatheter foam sclerotherapy of the great saphenous vein

Phlebologie ◽  
2007 ◽  
Vol 36 (06) ◽  
pp. 309-312 ◽  
Author(s):  
T. Schulz ◽  
M. Jünger ◽  
M. Hahn
Keyword(s):  
Saphenous Vein ◽  
Great Saphenous Vein ◽  
Clinical Stage ◽  
Clinical Signs ◽  
Cost Effective ◽  
Duplex Sonography ◽  
Foam Sclerotherapy ◽  
Average Loss ◽  
One Year ◽  
The Cost

Summary Objective: The goal of the study was to assess the effectiveness and patient tolerability of single-session, sonographically guided, transcatheter foam sclerotherapy and to evaluate its economic impact. Patients, methods: We treated 20 patients with a total of 22 varicoses of the great saphenous vein (GSV) in Hach stage III-IV, clinical stage C2-C5 and a mean GSV diameter of 9 mm (range: 7 to 13 mm). We used 10 ml 3% Aethoxysklerol®. Additional varicoses of the auxiliary veins of the GSV were sclerosed immediately afterwards. Results: The occlusion rate in the treated GSVs was 100% one week after therapy as demonstrated with duplex sonography. The cost of the procedure was 207.91 E including follow-up visit, with an average loss of working time of 0.6 days. After one year one patient showed clinical signs of recurrent varicosis in the GSV; duplex sonography showed reflux in the region of the saphenofemoral junction in a total of seven patients (32% of the treated GSVs). Conclusion: Transcatheter foam sclerotherapy of the GSV is a cost-effective, safe method of treating varicoses of GSV and broadens the spectrum of therapeutic options. Relapses can be re-treated inexpensively with sclerotherapy.

Examining the Hedging Effectiveness of Futures Contracts over Pre and Post Financial Crisis Period: Evidence from National Stock Exchange of India

2015 ◽  
Vol 3 (2) ◽  
Author(s):  
Kapil Gupta ◽  
Mandeep Kaur
Keyword(s):  
Financial Crisis ◽  
Stock Exchange ◽  
Futures Contracts ◽  
Price Risk ◽  
Hedge Ratio ◽  
Crisis Period ◽  
Hedging Effectiveness ◽  
Hedge Ratios ◽  
Time Invariant

Present study examines the efficiency of futures contracts in hedging unwanted price risk over highly volatile period i.e. June 2000 - December 2007 and January 2008 – June 2014, pre and post-financial crisis period, by using S&PC NXNIFTY, CNXIT and BANKNIFTY for near month futures contracts. The hedge ratios have been estimated by using five methods namely Ederingtons Model, ARMA-OLS, GARCH (p,q), EGARCH (p,q) and TGARCH (p,q). The study finds that hedging effectiveness increased during post crisis period for S&PC NXNIFTY and BANKNIFTY. However, for CNXIT hedging effectiveness was better during pre-crisis period than post crisis. The study also finds that time-invariant hedge ratio is more efficient than time-variant hedge ratio.

Pareto Set as a Model for Dispatching Resources in Emergency Centres (Preprint)

2018 ◽  
Author(s):  
Ricardo Guedes ◽  
Vasco Furtado ◽  
Tarcísio Pequeno ◽  
Joel Rodrigues
Keyword(s):  
Operational Research ◽  
Real Data ◽  
Pareto Set ◽  
Multi Objective Optimization ◽  
Pareto Dominance ◽  
Four Dimensions ◽  
Multi Objective ◽  
The Best Approximation ◽  
One Year ◽  
The Cost

UNSTRUCTURED The article investigates policies for helping emergency-centre authorities for dispatching resources aimed at reducing goals such as response time, the number of unattended calls, the attending of priority calls, and the cost of displacement of vehicles. Pareto Set is shown to be the appropriated way to support the representation of policies of dispatch since it naturally fits the challenges of multi-objective optimization. By means of the concept of Pareto dominance a set with objectives may be ordered in a way that guides the dispatch of resources. Instead of manually trying to identify the best dispatching strategy, a multi-objective evolutionary algorithm coupled with an Emergency Call Simulator uncovers automatically the best approximation of the optimal Pareto Set that would be the responsible for indicating the importance of each objective and consequently the order of attendance of the calls. The scenario of validation is a big metropolis in Brazil using one-year of real data from 911 calls. Comparisons with traditional policies proposed in the literature are done as well as other innovative policies inspired from different domains as computer science and operational research. The results show that strategy of ranking the calls from a Pareto Set discovered by the evolutionary method is a good option because it has the second best (lowest) waiting time, serves almost 100% of priority calls, is the second most economical, and is the second in attendance of calls. That is to say, it is a strategy in which the four dimensions are considered without major impairment to any of them.

Pricing of Futures Contracts

2018 ◽  
Author(s):  
Timothy A. Krause
Keyword(s):  
Fair Value ◽  
Commodity Futures ◽  
Futures Contracts ◽  
Spot Price ◽  
Futures Prices ◽  
No Arbitrage ◽  
Spot Prices ◽  
Cost Of Carry ◽  
Contract Expiration ◽  
The Cost

This chapter examines the relation between futures prices relative to the spot price of the underlying asset. Basic futures pricing is characterized by the convergence of futures and spot prices during the delivery period just before contract expiration. However, “no arbitrage” arguments that dictate the fair value of futures contracts largely determine pricing relations before expiration. Although the cost of carry model in its various forms largely determines futures prices before expiration, the chapter presents alternative explanations. Related commodity futures complexes exhibit mean-reverting behavior, as seen in commodity spread markets and other interrelated commodities. Energy commodity futures prices can be somewhat accurately modeled as a generalized autoregressive conditional heteroskedastic (GARCH) process, although whether these models provide economically significant excess returns is uncertain.

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