Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/105407
Authors: 
Broll, Udo
Welzel, Peter
Wong, Kit Pong
Year of Publication: 
2013
Citation: 
[Journal:] Contemporary Economics [ISSN:] 2084-0845 [Publisher:] Vizja Press & IT [Place:] Warsaw [Volume:] 7 [Year:] 2013 [Issue:] 2 [Pages:] 17-20
Abstract: 
This note studies the risk-management decisions of a risk-averse farmer. The farmer faces multiple sources of price uncertainty. He sells commodities to two markets at two prices, but only one of these markets has a futures market. We show that the farmer's optimal commodity futures market position, i.e., a cross-hedge strategy, is actually an over-hedge, a full-hedge, or an under-hedge strategy, depending on whether the two prices are strongly positively correlated, uncorrelated, or negatively correlated, respectively.
Subjects: 
agricultural price risk
risk management
commodity futures
correlation
cross-hedge
JEL: 
D73
D78
D83
Persistent Identifier of the first edition: 
Document Type: 
Article
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