Comparison of Some Static Hedging Models of Agricultural Commodities Price Uncertainty
Résumé
In static framework, many hedging strategies can be settled following the various
hedge ratios that have been developed in the literature. However, it is difficult to
choose among them the best the appropriate strategy according the to preference or
economic behavior of the decision-maker such as prudence and temperance. This is
so even with the hedging effectiveness measure. After introducing a hedging ratio
that take into account the prudence and temperance of the decision maker, we propose
a ranking based approach to measure the effectiveness using L-moment to classify
hedge portfolios, hence hedge ratios, with regard to their performance. Moreover,
we deal with the hedging issue in presence of quantity and rollover risks and
derive an optimal strategy that depends upon the basis and insurance contract. Such
hedging issue includes the relevant risks encountered in practice and we relate how
insurance contract, specially designed for production risk could affect the futures
hedge. The application on some agricultural futures prices data at hands shows that
taking into account quantity and rollover risks leads to better hedging strategy based
on the L-performance effectiveness measure.