Agricultural Applications of Value-at-Risk Analysis: A Perspective

Value-at-Risk (VaR) determines the probability of a portfolio of assets losing a certain amount in a given time period due to adverse market conditions with a particular level of confidence. Value-at-Risk has received considerable attention from financial economists and financial practitioners for its use in risk reporting, in particular the risks of derivatives. This paper provides a "state-of-the-art" review of VaR estimation techniques and empirical findings found in the finance literature. The ability of VaR estimates to represent large losses associated with tail events varies among procedure, confidence level, and data used. To date, there is no consensus to the most appropriate estimation technique. Potential applications of Value-at-Risk are suggested in the context of agricultural risk management. In the wake of the Hedge-to-Arrive crisis, the lifting of agricultural trade options by the CFTC, and the decreased government participation, VaR seems to have a place in the agricultural risk manager's toolkit.Value-at-Risk, risk management, estimation procedures

The Forecasting Value of New Crop Futures: A Decision-Making Framework

The statistical forecasting efficiency of new crop corn and soybean futures is the topic of frequent academic inquiry. However, few studies address the usefulness of these forecasts to economic agents??? decision making. Each year Central Illinois producers are faced with the decision to plant either corn or soybeans on marginal acreage. Agronomic concerns aside, these decisions hinge on the expected relative return of corn versus soybeans, which is largely a function of expected new crop prices. Do new crop futures prices reliably guide producers into the correct production decision? The results suggest that over the entire period of the analysis, futures markets provide only marginal decision-making information to the producer; however, more recent signals do appear to be useful. Further analysis explores several possible factors that could explain why the signals have improved so significantly since 1985.published or submitted for publicationnot peer reviewe

TIME-VARYING MULTIPRODUCT HEDGE RATIO ESTIMATION IN THE SOYBEAN COMPLEX: A SIMPLIFIED APPROACH

In developing optimal hedge ratios for the soybean processing margin, many authors have illustrated the importance of considering the interactions between the cash and futures prices for soybeans, soybean oil, and soybean meal. Conditional as well as time-varying hedge ratios have been examined, but in the case of multiproduct time-varying hedge ratios, the difficulty in estimation has been found to often outweigh any improvement in hedging effectiveness. This research examines the hedging effectiveness of the Risk Metrics procedure for estimating a time-varying covariance matrix for developing optimal hedge ratios for the soybean processing margin. The Risk Metrics method allows for a time-varying covariance matrix while being considerably easier to implement than multivariate GARCH (MGARCH) procedures. The Risk Metrics procedure has been advocated for use in developing Value-at-Risk estimates. While it provided considerable out-of-sample improvement in hedging effectiveness relative to a constant correlation MGARCH procedure, the Risk Metrics method provided only minimal improvement over a naive (1-to-1) hedging strategy. However, this research does illustrate the potential for the Risk Metrics methodology as a viable alternative to MGARCH procedures in a multiproduct hedging context.Marketing,

The Forecasting Value of New Crop Futures: A Decision-Making Framework

The statistical forecasting efficiency of new crop corn and soybean futures is the topic of frequent academic inquiry. However, few studies address the usefulness of these forecasts to economic agents' decision making. Each year Central Illinois producers are faced with the decision to plant either corn or soybeans on marginal acreage. Agronomic concerns aside, these decisions hinge on the expected relative return of corn versus soybeans, which is largely a function of expected new crop prices. Do new crop futures prices reliably guide producers into the correct production decision? The results suggest that over the entire period of the analysis, futures markets provide only marginal decision- making information to the producer; however, more recent signals do appear to be useful. Further analysis explores several possible factors that could explain why the signals have improved so significantly since 1985.forecasting efficiency, futures prices, decision making

THE THEORY OF CONTRARY OPINION: A TEST USING SENTIMENT INDICES IN FUTURES MARKETS

The theory of contrary opinion predicts price reversals following extremes in market sentiment. This research tests a survey-based sentiment index's usefulness as a contrary indicator across 28 U.S. futures markets. Using rigorous time-series tests, the sentiment index displays only a sporadic and marginal ability to predict returns, and in those instances the pattern is one of return continuation--not reversals. Therefore, futures traders who rely solely upon sentiment indices as contrary indicators may be misguided.bullish consensus, contrary opinion, market sentiment, Marketing,

Mechanisms of recruitment for the retrieval of food in Amitermes evuncifer Silvestri (Isoptera: Termitidae: Termitinae)

The study revealed that there was quantitative recruitment in colonies of Amitermes evuncifer, whenever food was discovered by the scouting foragers. Discovered food stimulated the termites to accelerate their running speed, to and from the food source. Increased trail-laying activity, accelerated movement and carrying of food by the returning workers facilitated recruitment of other confederates from their nest. These activities equally directed the recruited termites to the food source. Amitermes evuncifer was observed to regulate traffic in relation to newly discovered food source. The results showed that there was rapid communication between the termites of food source within 3-4 min. It was further observed that the trail to newly found food source did not become dominant over the trail to the already existing food source. The results showed clearly the effect of food on vital activities of termite

Are organically grown apples tastier and healthier? A comparative field study using conventional and alternative methods to measure fruit quality

Since 1994 important supermarket chains in Switzerland successfully sell apples from verified organic production. However, in supermarkets customers often ask whether there are, apart from a more environmentally friendly production, objective arguments of inner fruit quality that justify the higher prices of organic apples. In a field study with the ‘Golden Delicious’ cultivar, we harvested fruits of 5 pairs of organic/integrated fruit farms. The orchards within the pairs were less than 1 km from each other and were similar in micro climate, soil conditions and planting system. Maximum distance between the pairs was 180 km. To measure inner fruit quality we investigated at the beginning and at the end of cold storage (i) standard parameters (firmness, sugar, malic acid, mineral elements etc.); (ii) taste parameters by repeated panel tests; (iii) components that are good for human health (phenols, selenium, fibres, vitamin C and E) and (iv) fruit «vitality quality» by holistic approaches using image forming technique (crystallisation in copper chloride, and chromatography after Pfeiffer), degradation tests and feeding preference tests with laboratory rats. All fruit samples of organic orchards had significantly firmer fruit flesh (14%) and had 15% higher taste marks than conventional ones. P-content was 31% higher (p < 0.01) in organic apples and was closely correlated with technical quality (r2 = 0.93) and sensory score (r2 = 0.69). Content of phenols (mainly flavanols) was 19% and image forming quality 60% higher in organic apples. The picture producing method distinguished 100% correctly the organic and integrated samples and was closely in line with technical quality (r2 = 0.68). The results show that organically grown apples can have an outstanding inner quality. However, for generalizable conclusions more extensive studies are necessary

Effect of Compaction Banding on the Hydraulic Properties of Porous Rock: Part I—Experimental Investigation

The mechanical behavior and the influence of compaction banding on the hydraulic properties in soft porous rocks were studied. The tested rock was Calcarenite Tuffeau de Maastricht. In the frame of experimental investigations, triaxial and oedometric tests were conducted under dry and drained conditions. The results demonstrated that the rock is forming discrete compaction bands under high confining stresses and steep angle shear bands under low confining stresses. Permeability measurements during the oedometric and triaxial compression tests under drained conditions demonstrated that the axial permeability decreases with increasing axial strain. The maximum permeability decrease was three orders of magnitude for 40% of axial strain

DAC-Less amplifier-less generation and transmission of QAM signals using sub-volt silicon-organic hybrid modulators

We demonstrate generation and transmission of optical signals by directly interfacing highly efficient silicon-organic hybrid (SOH) modulators to binary output ports of a field-programmable gate array. Using an SOH Mach-Zehnder modulator (MZM) and an SOH IQ modulator we generate ON-OFF- keying and binary phase-shift keying signals as well as quadrature phase-shift keying and 16-state quadrature amplitude modulation (16QAM) formats. Peak-to-peak voltages amount to only 0.27 V-pp for driving the MZM and 0.41 V-pp for the IQ modulator. Neither digital-to-analog converters nor drive amplifiers are required, and the RF energy consumption in the modulator amounts to record-low 18 fJ/bit for 16QAM signaling