Intertemporal Risk Management Decisions of Farmers under Preference, Market, and Policy Dynamics



Table 4. Summarized Optimal Hedge Ratio in Response to Transaction Cost

Optimal Hedge Ratios (With CCP)

Year1

Year2

Year3        Year4

Year5

Mean

0.4207

0.3856

0.3651         0.3520

0.2677

Max

0.4221

0.3862

0.3655         0.3523

0.2679

Min

0.4195

0.3849

0.3648         0.3517

0.2676

Range

0.0026

0.0013

0.0008         0.0005

0.0002

Optimal Hedge Ratios (No CCP)

Year1

Year2

Year3

Year4

Year5

Mean

0.6100

0.5398

0.4972

0.4780

0.3933

Max

0.6119

0.5405

0.4976

0.4784

0.3935

Min

0.6083

0.5389

0.4967

0.4776

0.3932

Range

0.0036

0.0016

0.0009

0.0008

0.0003

Note: The hedging transaction cost varies from $0/bushel to $0.02/bushel.

48



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