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Assessing the vulnerability to price spikes in agricultural commodity markets

Author

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  • Triantafyllou, Athanasios
  • Dotsis, George
  • Sarris, Alexandros

Abstract

We empirically examine the predictability of the conditions which are associated with a higher probability of a price spike in agricultural commodity markets. We find that the forward spread is the most significant indicator of probable price jumps in maize, wheat and soybeans futures markets, a result which is in line with the “Theory of Storage”. We additionally show that some option-implied variables add significant predictive power when added to the more standard information variable set. Overall, the estimated probabilities of large price increases from our probit models exhibit significant correlations with the historical sudden market upheavals in agricultural markets.

Suggested Citation

  • Triantafyllou, Athanasios & Dotsis, George & Sarris, Alexandros, 2019. "Assessing the vulnerability to price spikes in agricultural commodity markets," Essex Finance Centre Working Papers 24921, University of Essex, Essex Business School.
    • Handle: RePEc:esy:uefcwp:24921
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    File URL: https://repository.essex.ac.uk/24921/
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    Keywords

    Agricultural price spikes; Tail Risk Measure; Extreme Value Theory; Risk neutral moments; Agricultural Commodities; Basis; Theory of Storage;
    All these keywords.

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