ALTERNATIVE PRICING STRATEGIES FOR FEED GRAINS IN ARIZONA USING FUTURES AND OPTIONS CONTRACTS ON CORN
KeywordsCorn -- Economic aspects.
Grain -- Economic aspects -- Arizona.
Commodity futures -- Arizona.
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PublisherThe University of Arizona.
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AbstractThis study concerns the evaluation of alternative pricing strategies involving options on feed grains futures contracts during the period of 1973-1986. To predict the option premiums that would have occurred at various points in this time period, the study did research on market premiums of options on corn futures contracts from March 1, 1985 until December 31, 1985. The research showed that market premiums conformed closely to the premiums estimated by Black model of options pricing. The generalized stochastic dominance with absolute risk aversion function intervals is applied in the study in order to evaluate the strategies. The results showed that under different risk preferences, (DARA and CARA), the commodity options strategies dominate the cash sale strategy, but do not dominate the hedging by selling futures contract strategy. Options may provide alternatives for feed grains producers and traders. Put (call) options provided protection from losses resulting from falling (raising) cash price and may somtimes raise average income/margin of feed grain producers and traders.
Degree ProgramGraduate College