Hedging Short-term Corn Price Risks in Tokyo versus Chicago's Project A

Leuthold, Raymond M.; Kim, Min-Kyoung

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https://hdl.handle.net/2142/4019 Copy

Description

Title

Hedging Short-term Corn Price Risks in Tokyo versus Chicago's Project A

Author(s)

• Leuthold, Raymond M.
• Kim, Min-Kyoung

Issue Date

2000-01

Keyword(s)

• Project A
• Tokyo Grain Exchange
• Chicago Board of Trade
• hedging

Abstract

This study investigates whether U.S. corn merchants can effectively manage the overnight price risk of cash corn purchased after the Chicago Board of Trade closes at 1:15 p.m. on either the electronic Project A market or in the corn contract traded on the Tokyo Grain Exchange. Three scenarios are examined: 1) overnight hedges; 2) day-to-day hedges; and 3) two-day hedges. Overnight hedges are the least effective of the three scenarios on both markets. E*hedging on Project A is more effective than hedging in Tokyo, yet trading of corn futures contracts on Project A remains relatively thin and illiquid. Steps need to be taken to encourage more trading of this contract.

Publisher

Office for Futures and Options Research, Department of Agricultural Economics, College of Agricultural, Consumer, and Environmental Sciences at the University of Illinois at Urbana-Champaign

Series/Report Name or Number

OFOR Working Paper Series, no. 00-02

Type of Resource

text

Language

en

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http://hdl.handle.net/2142/4019

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