Cross-hedging performance of wholesale beef in live cattle futures contracts revisited
dc.contributor.author | Bieroth, Casey W. | |
dc.date.accessioned | 2010-09-14T17:09:56Z | |
dc.date.available | 2010-09-14T17:09:56Z | |
dc.date.graduationmonth | December | en_US |
dc.date.issued | 2010-09-14T17:09:56Z | |
dc.date.published | 2010 | en_US |
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.description.advisor | Ted C. Schroeder | en_US |
dc.description.degree | Master of Science | en_US |
dc.description.department | Department of Agricultural Economics | en_US |
dc.description.level | Masters | en_US |
dc.identifier.uri | http://hdl.handle.net/2097/4943 | |
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.subject.umi | Economics, Agricultural (0503) | en_US |
dc.title | Cross-hedging performance of wholesale beef in live cattle futures contracts revisited | en_US |
dc.type | Thesis | en_US |