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An option on the average European futures prices for an efficient hog producer risk management

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  • Phélippé-Guinvarc’H, Martial
  • Cordier, Jean

Abstract

The volatility of hog prices is high compared to most agricultural commodities. However, European hog producers do not benefit from any agricultural policy support. Through the continuous production process and induced selling activity on spot markets, producers benefit from a natural moving average product pricing. In addition, asymmetric price risk management is able to increase the expected utility of risk adverse hog producers. But, if there is a futures contract at the European Exchange (EUREX), there is no option market and as a consequence no derivative contracts on the European hog market. The article is presenting how financial intermediaries could offer an innovative derivative contract to complement the “naturall ” steady price of the French hog producers.
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Suggested Citation

  • Phélippé-Guinvarc’H, Martial & Cordier, Jean, 2010. "An option on the average European futures prices for an efficient hog producer risk management," Review of Agricultural and Environmental Studies - Revue d'Etudes en Agriculture et Environnement (RAEStud), Institut National de la Recherche Agronomique (INRA), vol. 91(01).
    • Handle: RePEc:ags:frraes:188383
    DOI: 10.22004/ag.econ.188383
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    File URL: https://ageconsearch.umn.edu/record/188383/files/91-1-27-42.pdf
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    References listed on IDEAS

    as
    1. Renyuan Shao & Brian Roe, 2003. "The design and pricing of fixed‐ and moving‐window contracts: An application of Asian‐Basket option pricing methods to the hog‐finishing sector," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 23(11), pages 1047-1073, November.
    2. Chad E. Hart & Bruce A. Babcock & Dermot J. Hayes, 2001. "Livestock Revenue Insurance," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 21(6), pages 553-580, June.
    3. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-654, May-June.
    4. Chad E. Hart & Bruce A. Babcock, 2001. "Rankings of Risk Management Strategies Combining Crop Insurance Products and Marketing Positions," Center for Agricultural and Rural Development (CARD) Publications 01-wp267, Center for Agricultural and Rural Development (CARD) at Iowa State University.
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    Cited by:

    1. Carl GAIGNÉ & Cathie LAROCHE DUPRAZ & Alan MATTHEWS, 2015. "Thirty years of European research on international trade in food and agricultural products," Review of Agricultural and Environmental Studies - Revue d'Etudes en Agriculture et Environnement, INRA Department of Economics, vol. 96(1), pages 91-130.
    2. Nadja El Benni & Robert Finger, 2014. "Where is the risk? Price, yield and cost risk in Swiss crop production," Review of Agricultural and Environmental Studies - Revue d'Etudes en Agriculture et Environnement, INRA Department of Economics, vol. 95(3), pages 299-326.

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    More about this item

    Keywords

    Agricultural Finance; Risk and Uncertainty;

    JEL classification:

    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • Q14 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Finance
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy

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