Potential demand for hedging by Australian wheat producers

The potential for hedging Australian wheat with the new Sydney Futures Exchange wheat contract is examined using a theoretical hedging model parametised from previous studies. The optimal hedging ratio for an `average' wheat farmer was found to be zero under reasonable assumptions about transaction costs and based on previously published measures of risk aversion. The estimated optimal hedging ratios were found by simulation to be quite sensitive to assumptions about the degree of risk aversion. If farmers are significantly more risk averse than is currently believed, then there is likely to be an active interest in the new futures market.


Issue Date:
1997
Publication Type:
Journal Article
PURL Identifier:
http://purl.umn.edu/118012
Published in:
Australian Journal of Agricultural and Resource Economics, Volume 41, Issue 2
Page range:
157-168
Total Pages:
12




 Record created 2017-04-01, last modified 2017-04-04

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