EUROPEAN RAPESEED AND FOSSIL DIESEL: THRESHOLD COINTEGRATION ANALYSIS AND POSSIBLE IMPLICATIONS

Abstract

For European operators of biofuels plants there are not many hedge vehicles available to hedge operational margins. Cross hedges for rapeoil (with the rapeseed futures contract) and RME (with the NYMEX diesel futures contract) could be useful instruments. We use recent developments on threshold cointegration approaches to investigate if asymmetric dynamic adjusting processes exist among rapeseed and diesel prices. The results suggest that a threeregime threshold cointegration model suitably explains the dynamics of the data.Hedging, Rapeseed, Heating Oil, Threshold cointegration analysis, Agribusiness, Agricultural and Food Policy, Agricultural Finance, Crop Production/Industries, Demand and Price Analysis, Environmental Economics and Policy, Farm Management, Financial Economics, Industrial Organization, Institutional and Behavioral Economics, Production Economics,