Cross-hedging performance of wholesale beef in live cattle futures contracts revisited

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Show simple item record Bieroth, Casey W. 2010-09-14T17:09:56Z 2010-09-14T17:09:56Z 2010-09-14T17:09:56Z
dc.description.abstract Risk management decision makers face significant price risk when purchasing or selling wholesale beef. Previous research has identified cross-hedging wholesale beef in Live Cattle futures as a plausible means of reducing this risk. Changes in the way beef is marketed have led to poor performance of cross-hedging programs. Unlike earlier research, more recent studies have shown that Live Cattle futures are a poor venue for effective cross-hedging. This study replicates previous research to evaluate the current state of traditional cross-hedging performance. Focus then shifts to improving cross-hedging methods. Hedge ratios derived from a traditional cross-hedging methodology exhibit a great deal of sensitivity to season, estimation technique, and quality grade. Basis risk is abundant for this type of cross-hedging. To reduce the basis risk inherent with cross-hedging wholesale beef, bundling is proposed. This involves combining two or more cuts together in a single unit to be cross-hedged. Firms merchandising meat from a whole carcass would be able to provide a valuable risk management service if the basis risk faced when hedging a bundled product is less than the basis risk faced when cross-hedging the corresponding products independently. This research found that bundling has neither a positive or negative effect on basis risk. Therefore bundling is a plausible practice, but will not offer reduced basis risk to decision makers. en_US
dc.language.iso en_US en_US
dc.publisher Kansas State University en
dc.subject Cross-Hedging en_US
dc.subject Beef Price Risk en_US
dc.subject Bundling en_US
dc.title Cross-hedging performance of wholesale beef in live cattle futures contracts revisited en_US
dc.type Thesis en_US Master of Science en_US
dc.description.level Masters en_US
dc.description.department Department of Agricultural Economics en_US
dc.description.advisor Ted C. Schroeder en_US
dc.subject.umi Economics, Agricultural (0503) en_US 2010 en_US December en_US

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