Futures for farmers: Hedging participation and the Mexican corn scheme

Benavides, Guillermo; Snowden, P. N.

doi:10.1080/00220380600682330

Cited by 7 publications

(6 citation statements)

References 15 publications

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“…the estimates are obtained based on past time series data. 3 See for example, Engle (1982), Taylor (1986), Bollerslev, Chou and Kroner (1992), Wei and Leuthold (1998), Engle (2002), among many others. 4 However, the out-of-sample forecasting accuracy of this type of non-linear models is, in some cases, questionable (see Park and Tomek: 1989, Schroeder et.…”

Section: Literature Reviewmentioning

confidence: 99%

Asymmetric Volatility Relevance in Risk Management: An Empirical Analysis using Stock Index Futures

Benavides

2021

REMEF

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The objective of this research work is to show the relevance of asymmetries in estimating volatility. The methodology consists in the application of ARCH-type models and implied volatilities of options (IV) to estimate Value-at-Risk (VaR). These for a portfolio of stock index futures for various time horizons. The empirical analysis is carried out for the futures contracts for the Standard and Poors 500 and Mexican Stock Exchange Indices. According to the results, the IV model is superior in terms of precision compared to the ARCH-type models. It is recommended to use the relevant statistical gains when asymmetries are included with respect to when asymmetries are not used. The referred gains range from 4 to 150 basis points of minimum capital risk requirements. The originality of the present work consists of showing the importance of considering the asymmetric effects with IV and ARCH-type models in volatility forecasts within risk management analysis. It is concluded that the methodology means gains in monetary terms.

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Section: Literature Reviewmentioning

confidence: 99%

Asymmetric Volatility Relevance in Risk Management: An Empirical Analysis using Stock Index Futures

Benavides

2021

REMEF

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“…where SYNT is the synthetic futures price for delivery at T, Fj is the contract j futures price expiring at Tj, Fi is the contract i futures price expiring at Ti, T equals 30, the chosen constant 18 Even though futures contracts can be used to hedge financial risk it is common to observe that, in some cases, there is not an optimal demand for them. For example, see Benavides and Snowden (2006) for details. 19 For a good reference about the mechanics of futures markets the reader could refer to Fink and Feduniak (1988).…”

Section: Iv2 Data Transformationmentioning

confidence: 99%

Asymmetric Volatility Effects in Risk Management: An Empirical Analysis using a Stock Index Futures

Benavides¹

2020

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In this research paper ARCH-type models and option implied volatilities (IV) are applied in order to estimate the Value-at-Risk (VaR) of a stock index futures portfolio for several time horizons. The relevance of the asymmetries in the estimated volatility estimation is considered. The empirical analysis is performed on futures contracts of both the Standard and Poors 500 Index and the Mexican Stock Exchange. According to the results, the IV model is superior in terms of precision compared to the ARCH-type models. Under both methodologies there are relevant statistical gains when asymmetries are included. The referred gains range from 4 to around 150 basis points of minimum capital risk requirements. This research documents the importance of taking asymmetric effects (leverage effects) into account in volatility forecasts when it comes to risk management analysis.

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“…To do so, they have often engaged with an umbrella organisation that offers the benefits of scale of volumes traded and financial credibility that the individual farmer or producer could not hope to achieve. A prime example of this is in Mexico where the state body ASERCA has successfully traded future and options contracts on US commodity exchanges on behalf of participating cotton growers (see Benavides and Snowden, 2006). While only one of several examples (see Varangis and Larson, 1996, for more) it does highlight what can be achieved without further institutional intervention.…”

Section: Commodity Price Risk: Widening Available Hedging Opportunmentioning

confidence: 99%

Comparative Advantage and the Gains from Financial Trade: A Reappraisal

Morgan

Snowden

2007

World Economy

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Emerging market crises have suggested that a national benefit-cost assessment of external financial liberalisation could well prove unfavourable. This paper re-examines the principle of comparative advantage in its application to financial trade to seek guidance on measures that might permit a fuller realisation of the potential benefits involved. Drawing a parallel with Balasubramanyam's work on the gains from FDI and international migration we distinguish between those arising in financial trade from the net transfer of capital, and those deriving from the contemporaneous exchange of financial claims or services of equivalent value. In the first interpretation a country's comparative advantage is manifested by its role in 'intertemporal' trade (as a borrower or lender). Our alternative emphasis is on the contractual risk-return characteristics of the financial claims exchanged. This perspective is applied firstly to portfolio diversification gains arising from further international stock market integration. Secondly, price risk management for developing countries in international primary commodity trade is discussed. Both applications imply the need for significant institutional development but could realise approximately contemporaneous gains reminiscent both of those involved in merchandise trade and in the skills and product (or service) flows that Balasubramanyam has emphasised in relation to FDI and international migration. Copyright 2007 The Authors Journal compilation 2007 Blackwell Publishing Ltd .

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Futures for farmers: Hedging participation and the Mexican corn scheme

Cited by 7 publications

References 15 publications

Asymmetric Volatility Relevance in Risk Management: An Empirical Analysis using Stock Index Futures

Asymmetric Volatility Relevance in Risk Management: An Empirical Analysis using Stock Index Futures

Asymmetric Volatility Effects in Risk Management: An Empirical Analysis using a Stock Index Futures

Comparative Advantage and the Gains from Financial Trade: A Reappraisal

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