Hedging with futures contracts in the Brazilian soybean complex: BM&F vs. CBOT
This article analyzes the effectiveness of hedging Brazilian soy oil, soy meal, and soybeans in the Chicago Board of Trade (CBOT) and in the Brazilian Commodities and Futures Exchange (BM&F) to reduce the risk of financial loss due to commodity price fluctuations. The econometric results show th...
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| Format: | Article |
| Language: | English |
| Published: |
Sociedade Brasileira de Economia e Sociologia Rural
2003-06-01
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| Series: | Revista de Economia e Sociologia Rural |
| Subjects: | |
| Online Access: | http://www.scielo.br/scielo.php?script=sci_arttext&pid=S0103-20032003000200004 |
| _version_ | 1818390217122381824 |
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| author | Andréia Regina O. da Silva Danilo R. D. Aguiar João Eustáquio de Lima |
| author_facet | Andréia Regina O. da Silva Danilo R. D. Aguiar João Eustáquio de Lima |
| author_sort | Andréia Regina O. da Silva |
| collection | DOAJ |
| description | This article analyzes the effectiveness of hedging Brazilian soy oil, soy meal, and soybeans in the Chicago Board of Trade (CBOT) and in the Brazilian Commodities and Futures Exchange (BM&F) to reduce the risk of financial loss due to commodity price fluctuations. The econometric results show that a cross-hedging strategy using the BM&F soybean futures contract is an instrument of low effectiveness for managing soy oil and soy meal price risk. Despite low effectiveness, the estimates demonstrate total advantage for soy meal hedging operations using CBOT soy meal futures contracts rather than cross-hedging using BM&F soybean futures contracts. With some exceptions, the results are also more favorable for hedging soy oil with soy oil futures contracts at the CBOT rather than cross hedging with soybeans at the BM&F. Conversely, Brazilian traders hedging soybeans receive more effective risk protection by trading soybean futures contracts at the BM&F than by trading soybean futures contracts at the CBOT. |
| first_indexed | 2024-12-14T04:54:07Z |
| format | Article |
| id | doaj.art-0c259f427b584e7fac1cc2a3636e4c1f |
| institution | Directory Open Access Journal |
| issn | 0103-2003 1806-9479 |
| language | English |
| last_indexed | 2024-12-14T04:54:07Z |
| publishDate | 2003-06-01 |
| publisher | Sociedade Brasileira de Economia e Sociologia Rural |
| record_format | Article |
| series | Revista de Economia e Sociologia Rural |
| spelling | doaj.art-0c259f427b584e7fac1cc2a3636e4c1f2022-12-21T23:16:27ZengSociedade Brasileira de Economia e Sociologia RuralRevista de Economia e Sociologia Rural0103-20031806-94792003-06-0141238340510.1590/S0103-20032003000200004Hedging with futures contracts in the Brazilian soybean complex: BM&F vs. CBOTAndréia Regina O. da SilvaDanilo R. D. AguiarJoão Eustáquio de LimaThis article analyzes the effectiveness of hedging Brazilian soy oil, soy meal, and soybeans in the Chicago Board of Trade (CBOT) and in the Brazilian Commodities and Futures Exchange (BM&F) to reduce the risk of financial loss due to commodity price fluctuations. The econometric results show that a cross-hedging strategy using the BM&F soybean futures contract is an instrument of low effectiveness for managing soy oil and soy meal price risk. Despite low effectiveness, the estimates demonstrate total advantage for soy meal hedging operations using CBOT soy meal futures contracts rather than cross-hedging using BM&F soybean futures contracts. With some exceptions, the results are also more favorable for hedging soy oil with soy oil futures contracts at the CBOT rather than cross hedging with soybeans at the BM&F. Conversely, Brazilian traders hedging soybeans receive more effective risk protection by trading soybean futures contracts at the BM&F than by trading soybean futures contracts at the CBOT.http://www.scielo.br/scielo.php?script=sci_arttext&pid=S0103-20032003000200004cross-hedgingsoybean industryhedging effectiveness |
| spellingShingle | Andréia Regina O. da Silva Danilo R. D. Aguiar João Eustáquio de Lima Hedging with futures contracts in the Brazilian soybean complex: BM&F vs. CBOT Revista de Economia e Sociologia Rural cross-hedging soybean industry hedging effectiveness |
| title | Hedging with futures contracts in the Brazilian soybean complex: BM&F vs. CBOT |
| title_full | Hedging with futures contracts in the Brazilian soybean complex: BM&F vs. CBOT |
| title_fullStr | Hedging with futures contracts in the Brazilian soybean complex: BM&F vs. CBOT |
| title_full_unstemmed | Hedging with futures contracts in the Brazilian soybean complex: BM&F vs. CBOT |
| title_short | Hedging with futures contracts in the Brazilian soybean complex: BM&F vs. CBOT |
| title_sort | hedging with futures contracts in the brazilian soybean complex bm f vs cbot |
| topic | cross-hedging soybean industry hedging effectiveness |
| url | http://www.scielo.br/scielo.php?script=sci_arttext&pid=S0103-20032003000200004 |
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