to be intuitively definable in the player’s
mind. A realization evolves that while there
are guidelines and principles to risk manage-
ment, there are not absolute rules that will
always work. Assimilation of these types of
understanding generally require several
hours of play. Many players are self-motivated
to pursue play to this level. Some are not. In a
classroom setting, motivation to achieve this
level of experience can be enhanced by asking
students to report their experiences and
answer specific questions about when and
why various risk management strategies were
and should be used.
AVAILABILITY AND HARDWARE AND
SOFTWARE REQUIREMENTS
The program is available for both Apple and
IBM microcomputers. The program loads and
runs automatically. No supplemental software
is required. The Apple version is written in
Applesoft BASIC and will run on Apple II +,
lie, and IIc machines with 64K of memory.
Only one disk drive is required, and the pro-
gram is designed for non-color monitors. The
IBM version of the program is written in IBM
BASIC and uses IBMDOS. It is designed for
IBM Personal Computers with at least 256K
of memory and requires a Color Graphics
Adapter (CGA) card as well as a color graphics
monitor. The programs and a User’s Manual
are available from the author for a handling
and processing fee of $15.
SUMMARY
The Market Risk Game provides a teaching
tool capable of complementing and extending
the knowledge transmitted through tradi-
tional lectures and written material dealing
with commodity market risk management.
The game provides applied, individualized
learning experiences through which the prin-
ciples and objectives of hedging and options
use can be studied in a simulated realistic
environment that captures both the dynamic
and stochastic nature of risk management.
Through the game, a number of key learning
experiences can be provided that are not
easily developed by lectures and/or written
material. Some of the major concepts,
perspectives, and abilities enhanced through
these experiences are: a) a perspective of the
amount of risk present in the cash market ver-
sus the risk remaining after a hedge or put option
is used; b) an understanding of the differences
in the nature of the risk and opportunities re-
maining after a hedge is placed versus after a
put option is bought; c) the ability to distin-
guish between bad planning and misconception
versus the consequences of uncontrolled risk
which may be present even after using hedg-
ing or put options; and d) the ability to
evaluate a market situation, make a decision,
and, most critically, accept the consequences
of that decision despite the fact that the
results of the decision cannot be predicted
with complete accuracy, and knowing that
even though the decision may have been the
best action at the time it was made, it may not
turn out to be the best action given perfect
hindsight. The latter point is critical to sus-
tained use of hedging and options.
The above-listed skills go well beyond
simply understanding the mechanics of hedg-
ing and using options. They address the heart
of risk management. Lectures and written
material are well suited for introducing the
mechanics of using risk management tools,
but they do not provide the depth of
understanding and experience necessary to
impart the type of concepts listed above. In
many cases, lectures and written material do
not provide the confidence and experience
needed to enter the real market with actual
money at stake. The Market Risk Game is
designed to provide the learning experiences
necessary to enhance traditional introductory
lectures and written material about market
risk management to a level that will permit
successful use of hedging and options as risk
management tools. The game does not teach
one all there is to know about risk manage-
ment with hedging and options, but it is
capable of teaching one to become a confident
and functional user of basic risk management
strategies using hedging and options.
REFERENCES
“Ag Options Systems.” A microcomputer program, Ag Computer Services Inc., 4037 West Fifth,
Amarillo, Texas 79109.
Anderson, K. B., and J. E. Ikerd. “Whole Farm Risk-Rated Microcomputer Model.” S. J. Agr.
Econ., 16(1985):183-87.
Brugler, A. “OPMASTER.” A microcomputer program, Market Master Co., 445 Oakland Park
Avenue, Columbus, Ohio 43214.
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