The name is absent



I 37




70

74
75
70
Б0
ББ
Б4
Б5
Б0
50

54
55
50
НО

ЧЧ
45


PRICE OF «65 PUT OPTION IS J ♦ 6.09
PRICE OF »56 PUT OPTION IS ι ♦ .Θ3
FUTURE PRICE »59.39 CASH PRICE »55.31

ADVFWCE DAYS <l-9) trading list—O

Figure 1. Graphic Display of the Simulated Cash and Futures Prices.

construed as meaning this is the game’s inter-
pretation of reality. In fact, the manner in
which the cash prices are determined is not
evident to the player. The approach used was
taken because it was computationally conve-
nient. The cash price is calculated as a moving
average of the futures price, plus or minus a
basis. The basis used contains both an ex-
pected value and a random component. This
simulation process results in a more stable
cash price than futures price. This is generally
the case in the actual markets.

The basis (cash price minus futures price) is
generated randomly but with a definite ex-
pected pattern. Both wheat and cattle have
been assigned an expected basis at the end of
the simulation period. Players can use an in-
formation menu to find out what these basis
values are. The initial simulation period basis
is randomly selected. In the case of wheat, it is
constrained to roughly reflect storage cost
and is, therefore, always negative. In the case
of cattle, the initial basis may be either
negative or positive. The difference between
the initial basis and expected closing basis is
used to calculate the daily rate of change needed
to make the initial basis close to the expected
closing basis. A daily expected basis is then
calculated by adjusting by this amount each
day. A random component is added to the daily
expected basis in figuring the cash price
relative to the moving average futures price.
The magnitude of this randomness is reduced
over the simulation period. Hence in the early
phases of the game, the cash and futures
prices are less correlated than in the later
phases. .

Hedging and Marketing Decisions

A “Trading Alternatives Menu” can be
accessed by entering a zero value for days to
simulate. This menu allows players to make a
marketing decision or to obtain a more detailed
analysis of the current situation. Figure 2
presents the respective menus for cattle and
wheat. They are slightly different due to the
uniqueness of the decision framework for each
commodity. Selection of each menu item
results in the display of another screen of in-
formation. By selecting various menu items,

143




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