Abstract: Abstract Some extension economists and others recommend profit margin hedging as a way to choose the timing of crop sales. However, the theory behind this strategy recommendation is not well developed. This article determines the producer's utility function and price processes where profit margin hedging is optimal. Profit margin hedging is shown to be an optimal strategy under a highly restricted target utility function even in an efficient market. Profit margin hedging is profitable if prices are mean reverting.
Publication Year: 2010
Publication Date: 2010-01-28
Language: en
Type: article
Indexed In: ['crossref']
Access and Citation
Cited By Count: 19
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