Hedging performance of shrimp futures contracts with multiple deliverable grades

Martnez-Garmendia, Josu; Anderson, James L.

doi:10.1002/(sici)1096-9934(199912)19:8<957::aid-fut6>3.0.co;2-z

Cited by 38 publications

(16 citation statements)

References 23 publications

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“…With increased aquaculture production there has been interest in futures contracts for two of the most valuable species -shrimp and salmon. The only seafood futures contracts that have been analyzed in the academic literature is the shrimp contracts at the Minneapolis Grain Exchange (Martínez-Garmendia & Anderson, 1999. These contracts failed basic tests for a well-functioning futures market, and it is then not too surprising that the contract has been terminated.…”

Section: Discussionmentioning

confidence: 99%

“…The limited attempts at establishing futures contracts for seafood are examples of this. The shrimp futures contracts at Minneapolis Grain Exchange as the futures price did not provide an unbiased estimate for the spot price (Martínez-Garmendia & Anderson, 2001), liquidity was limited and it provided a poor tool at hedging (Martínez-Garmendia & Anderson, 1999).…”

Section: Introductionmentioning

confidence: 99%

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The spot-forward relationship in the Atlantic salmon market

Asche

Misund

Øglend

2016

Aquaculture Economics & Management

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This study examines the Fish Pool salmon futures contract with respect to how well the market performs in terms of the futures price being an unbiased estimator of the spot price and whether the market provides a price discovery function. Using data for 2006-2014 and with futures prices with maturities up to 6 months we find that spot and lagged futures prices are cointegrated and that the futures price provides an unbiased estimate of the spot price. We also find that, with the exception of the front month, that the causality is one-directional. The spot prices lead futures prices between 1-6 months maturity. Hence, while the spot and lagged futures prices are unbiased estimates, we do not find support for the hypothesis that futures prices provide a price discovery function. Rather, it seems that innovations in the spot price influence futures prices. This finding is not uncommon in new and immature futures contracts markets. Hence, the salmon futures market is still immature and has not yet reached the stage where futures prices are able to predict future spot prices.

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Section: Discussionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

The spot-forward relationship in the Atlantic salmon market

Asche

Misund

Øglend

2016

Aquaculture Economics & Management

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“…It is also of interest to note that for parts of the period covered by our data, a futures market has operated for shrimps in Chicago (Martínez-Garmendia & Anderson, 1999), forwards where introduced for salmon in 1999 by Direct Hedge in Switzerland (Asche & Bjørndal, 2011) and salmon futures commenced trading in 2006 at Fishpool in Bergen (Solibakke, 2012;Oglend, 2013). In general, one expects forward or future markets to reduced price volatility if they have any effect.…”

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confidence: 99%

Price Volatility in Seafood Markets: Farmed vs. Wild Fish

Asche

Dahl

Steen

2015

Aquaculture Economics & Management

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& Price volatility has an important impact on seafood markets and the aquaculture industry. This article investigates price volatility regimes along three dimensions; technology, species and product form. We identify regimes using the Iterated Cumulative Sum of Squares (ICSS), which allow us to compare the volatility found in aquaculture products, as well as comparing against fish-meal and soybeans. The results help identify the level of price risk found within the aquaculture industry across species and products. In addition, we differentiate between technologies comparing wild-caught fish with aquaculture products. The results also help us consider the relative riskiness of aquaculture compared to other industries. The results indicate that in aggregate, price volatility for aquacultured products is substantially lower than for wild. However, this varies substantially between species.

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“…The choice of the expiration interval for cash settled futures contracts (e.g., two days for lean hogs versus 30 calendar days for Federal funds) impacts how the futures price behaves in terms of volatility, pricing, and basis convergence (Kimle and Hayenga, 1994). Furthermore, while researchers have expended considerable effort to determine characteristics that are important for successful futures contracts (Black, 1986;Gray, 1978;Fofana and Brorsen, 1994) or have examined the characteristics of failed contracts (Thompson, Garcia, and Wildman, 1996), little research has explored how futures contract form influences its pricing behavior beyond the implications of embedded options contained in delivery-settled futures (Hranaiova and Tomek, 2002;Martinez-Garmendia and Anderson, 1999).…”

Section: Introductionmentioning

confidence: 99%

Contract Design: A Note on Cash Settled Futures

Manfredo

Sanders²

2003

Journal of Agricultural &Amp; Food Industrial Organization

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This note presents an intuitive interpretation and expression for pricing cash settled futures contracts. In particular, the choice of the averaging period for the underlying cash index is evaluated. A question arises as to how the choice of the averaging period may effect how the futures contract is priced. In this note, it is shown that under certain assumptions, the behavior of the futures price prior to entering the expiration interval is independent of the averaging interval's length for storable commodities. However, this is not the case for nonstorable commodities. An examination of the Minneapolis Grain Exchange's National Corn Index futures provides empirical support for the results. Given the increasing interest in cash settled futures, especially for futures contracts on agricultural commodities, these results should prove useful to futures exchanges when considering contract design. Ultimately, contract design choices are a critical factor in the success of any futures contract. In the context of agricultural futures contracts, successful contracts can contribute to increased social welfare and greater efficiency of the food marketing system.

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Hedging performance of shrimp futures contracts with multiple deliverable grades

Cited by 38 publications

References 23 publications

The spot-forward relationship in the Atlantic salmon market

The spot-forward relationship in the Atlantic salmon market

Price Volatility in Seafood Markets: Farmed vs. Wild Fish

Contract Design: A Note on Cash Settled Futures

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