Managing multiple international risks simultaneously with an optimal hedging model

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 cocoa 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

International Risk Management: Optimal Hedging for the Government Export Agency in the Ivory Coast

A risk management model based on portfolio theory, which accounts jointly for price, quanitity, interest rate, and exchange rate risks, is developed and applied to cocoa and coffee production and exports in the Ivory Coast. Using commodity and financial futures marlets jointly, the results show that a government export agency can reduce risks for 27 to 86 percent by following a multicommodity hedging programme. The model and technique developed are applicable to many international risk management situations

COMMODITY FUTURES PRICE CHANGES: NORMALITY AND IMPLICATIONS FOR OPTION PRICING

The distribution of day-to-day price changes for wheat, soybean, and live cattle futures contracts was examined for the period from January 1973 through December 1982. The results demonstrate a move toward independence and normality, suggesting option pricing formulae which assume normality may provide accurate representations of option values