Managing multiple international risks simultaneously with an optimal hedging model

Abstract

ABSTRACf 31Sarassoro, a.F. and Leuthold, R.M., 1991. Managing multiple international risks simultaneously with an optimal hedging model. Agric. Econ., 6: 31-47. A risk management model based on portfolio theory which accounts jointly for price, quantity, interest rate and exchange rate risks is developed and applied to eocoa and coffee production and exports in the Ivory Coast. Utilizing commodity and financial futures markets jointly, the results show that a government export agency can reduce risks from 27% to 89% by following a multicommodity hedging program which manages several risks simultaneously. The model and technique developed are applicable to many multiproduct firm and international risk management situations.INTRODUCfION 0169-5150/91/$03.50