On the Pricing of Cross Currency Futures Options for Canadian Grains and Livestock

Turvey, Calum G.; Yin, Shihong

doi:10.1111/j.1744-7976.2002.tb00340.x

Cited by 5 publications

(4 citation statements)

References 30 publications

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“…Since agri-food commodity prices are not expected to be correlated with the market for foreign currencies, the possibilities to use foreign currency contracts to hedge price risk is entirely related to currency movements. Turvey and Yin (2002) discuss the role of multiproduct risks and the effect of foreign exchange on Canadian prices of agri-food commodities. 6 As Moschini and Lapan (1995) note, the assumption that there exists only one option at a given strike price is restrictive since producers would benefit by having additional options available.…”

Section: Discussionmentioning

confidence: 99%

Developing Hedging Strategies for Québec Hog Producers under Revenue Insurance

Gervais¹,

Doyon

2004

Canadian J Agri Economics

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The paper investigates the optimal hedging strategies of Québec hog producers when they participate in a publicly funded revenue insurance program known as ASRA (Régime d'assurance‐stabilisation des revenus agricoles). A forecast model of local cash and futures prices is built and Monte Carlo methods are used to derive the optimal futures and option positions of Québec hog producers. The positive correlation between forecasts of futures and cash spot prices induces positive sales of futures and put options to hedge price risk. ASRA provides put options to hog producers at actuarially advantageous terms. Producers can increase the expected utility of profits by selling back a portion of these put options using financial markets. Options are attractive to manage price risk given the nonlinearity in the profit function induced by the revenue insurance scheme. Speculative incentives to use futures and options are also discussed in the context of ASRA.

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Section: Discussionmentioning

confidence: 99%

Developing Hedging Strategies for Québec Hog Producers under Revenue Insurance

Gervais¹,

Doyon

2004

Canadian J Agri Economics

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“…Sin embargo, a partir de los noventa se han empezado a desarrollar los seguros de ingresos en países como EE.UU. (Skees, 1999a(Skees, , 1999bGoodwin, 2001aGoodwin, , 2001bGoodwin y Ker, 1998a, 1998bJust y Pope, 2002) y Canadá (Turvey y Yin, 2002;Mussel y Martin, 2001;Turvey, 1992a;1992b;Roberts et al 1998). En EE.UU.…”

Section: Los Riesgos De Precios Y Las Herramientas Que Ayudan a Gestiunclassified

El nuevo seguro de ingresos de la patata: Una evaluación preliminar

Dorado

Manzanares

Díaz-Caneja

et al. 2011

EARN

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In 2003 and 2004, an insurance product that protects against market risks of agricultural commodities was offered in Spain. It consists on a revenue insurance product which has been launched as a pilot program for mid-season and late potato in five Spanish provinces (Álava, Burgos, La Rioja, León and Valladolid). The objective of this article is to describe the characteristics of this insurance product and to perform a preliminary evaluation of the seasons it was marketed. We start from a conceptual approach to the market risk management instruments, that constitute the context for the current program. Later, we explain the price model used to define market reference prices and the premia, checking the quality of the statistical price model against the potato farm-gate prices. Finally, the article ends with a preliminary valuation/ assessment of this first pilot experience in Spain, stressing those aspects which are liable/prone to be improved and reckoning the possible extensions of this insurance line to other potato varieties, provinces and also to other agricultural commodities.

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“…For instance, in Canada some over-the-counter (OTC) products offered to farmers were priced in Canadian dollars with the underlying priced in USD; however, those options did not consider basis risk (Braga, 1996). Accounting for basis risk, Turvey and Yin (2002) analyze the application of quanto options to agricultural commodities in Canada at several locations. Quanto options are used when the underlying asset of an option is quoted in a different currency than its payments.…”

Section: Introductionmentioning

confidence: 99%

“…ModelTurvey and Yin (2002) develop a quanto model that includes CME traded futures, exchange rate and basis risk for an over-the-counter Canadian hog options program based on…”

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confidence: 99%

Cross market price support and agricultural development

Chiu

Turvey²

2014

The Journal of Risk Finance

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Purpose – This paper aims to develop a market-driven mechanism for commodity price insurance in developing countries lacking access to futures markets or other forms of hedging products. Design/methodology/approach – The model incorporates futures, exchange rate and local basis risk under the Black-Scholes framework to develop quanto (quantity adjusting option). When the domestic price of a commodity in a developing country is strongly correlated to the price in a futures market, price support premiums can be estimated. The authors use daily corn futures prices, exchange rate MXP/USD, and prices of corn and sorghum at several locations in Mexico. Findings – The authors calculated the price insurance premium at various local markets in Mexico for corn and sorghum. The results are consistent with those for the USA, showing that relative price premiums are similar. Research limitations/implications – The results provide a benchmark to estimate the net welfare effects of government programs for agricultural price support. Practical implications – The model shows that privately provided agricultural price insurance is feasible under certain conditions for developing countries without an established futures market. Originality/value – This paper provides market-based agricultural options in Mexico which contributes to the existing government price support program.

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On the Pricing of Cross Currency Futures Options for Canadian Grains and Livestock

Cited by 5 publications

References 30 publications

Developing Hedging Strategies for Québec Hog Producers under Revenue Insurance

Developing Hedging Strategies for Québec Hog Producers under Revenue Insurance

El nuevo seguro de ingresos de la patata: Una evaluación preliminar

Cross market price support and agricultural development

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