The Performance of U.S. Ethanol Futures Markets on the World Stage
Autor(a) principal: | |
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Data de Publicação: | 2016 |
Outros Autores: | , , |
Tipo de documento: | Artigo |
Idioma: | eng |
Título da fonte: | Repositório Institucional da UFLA |
Texto Completo: | http://revista.dae.ufla.br/index.php/ora/article/view/836 http://repositorio.ufla.br/jspui/handle/1/12906 |
Resumo: | This study examines the feasibility of Brazilian ethanol dealers using the U.S. ethanol futures contracts as a price-risk managementvehicle. This application is appropriate given that the U.S. and Brazil are the world’s largest and second largest ethanol producers.This specific application is part of a larger consideration as to how U.S. futures markets perform for hedging international commodities.This study considers the reasons why U.S. ethanol contracts might and might not work as hedging vehicles for Brazilian ethanolinventories prior to conducting an empirical investigation. Our empirical hedge ratio model formulates three components of pricerisk for international users of U.S. futures markets. These are (1) the risk of commodity price change given the initial currencyexchange rate, (2) the risk of exchange rate change, given the commodity’s initial price, and (3) the risk of covariation between thecommodity’s price and the currency exchange rate. Based on these sources of price risk, the hedging portfolio consists of the U.S.ethanol futures contract and the Brazilian real futures contract. Our analysis reveals that the U.S. ethanol futures contract provideslittle price-risk protection for Brazilian ethanol holder while the Brazilian real futures contract offers some protection. In contract,we present results from crude oil futures markets in which the U.S. crude oil futures contract gives the bulk of price risk protectionand the currency futures contract provides much less. We conclude (1) that the ethanol findings are not universal and depend onthe provisions of the U.S. ethanol futures contract and (2) the contracts traded on the Brazilian futures exchange do not competedirectly with the U.S. contracts. |
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The Performance of U.S. Ethanol Futures Markets on the World StageBrazilian ethanolHedgingPrice riskExchange rate riskEtanol - Mercados futurosRisco de preçoRisco de taxa de câmbioThis study examines the feasibility of Brazilian ethanol dealers using the U.S. ethanol futures contracts as a price-risk managementvehicle. This application is appropriate given that the U.S. and Brazil are the world’s largest and second largest ethanol producers.This specific application is part of a larger consideration as to how U.S. futures markets perform for hedging international commodities.This study considers the reasons why U.S. ethanol contracts might and might not work as hedging vehicles for Brazilian ethanolinventories prior to conducting an empirical investigation. Our empirical hedge ratio model formulates three components of pricerisk for international users of U.S. futures markets. These are (1) the risk of commodity price change given the initial currencyexchange rate, (2) the risk of exchange rate change, given the commodity’s initial price, and (3) the risk of covariation between thecommodity’s price and the currency exchange rate. Based on these sources of price risk, the hedging portfolio consists of the U.S.ethanol futures contract and the Brazilian real futures contract. Our analysis reveals that the U.S. ethanol futures contract provideslittle price-risk protection for Brazilian ethanol holder while the Brazilian real futures contract offers some protection. In contract,we present results from crude oil futures markets in which the U.S. crude oil futures contract gives the bulk of price risk protectionand the currency futures contract provides much less. We conclude (1) that the ethanol findings are not universal and depend onthe provisions of the U.S. ethanol futures contract and (2) the contracts traded on the Brazilian futures exchange do not competedirectly with the U.S. contracts.Organizações Rurais & Agroindustriais2016-06-102017-05-09T19:35:04Z2017-05-09T19:35:04Z2017-05-09info:eu-repo/semantics/articleinfo:eu-repo/semantics/publishedVersionapplication/pdfhttp://revista.dae.ufla.br/index.php/ora/article/view/836SOUZA, W. A. da R. de; LIU, J.; YANG, X.; DAHLGRAN, R. The Performance of U.S. Ethanol Futures Markets on the World Stage. Organizações Rurais & Agroindustriais, Lavras, v. 18, n. 1, p. 13-24, jun. 2016.http://repositorio.ufla.br/jspui/handle/1/12906Organizações Rurais & Agroindustriais; v. 18, n. 1 (2016)2238-68901517-3879reponame:Repositório Institucional da UFLAinstname:Universidade Federal de Lavras (UFLA)instacron:UFLAenghttp://revista.dae.ufla.br/index.php/ora/article/view/836/509Souza, Waldemar Antonio da Rocha deLiu, JingyuYang, XiaoyiDahlgran, Rogerinfo:eu-repo/semantics/openAccess2021-03-05T14:46:09Zoai:localhost:1/12906Repositório InstitucionalPUBhttp://repositorio.ufla.br/oai/requestnivaldo@ufla.br || repositorio.biblioteca@ufla.bropendoar:2021-03-05T14:46:09Repositório Institucional da UFLA - Universidade Federal de Lavras (UFLA)false |
dc.title.none.fl_str_mv |
The Performance of U.S. Ethanol Futures Markets on the World Stage |
title |
The Performance of U.S. Ethanol Futures Markets on the World Stage |
spellingShingle |
The Performance of U.S. Ethanol Futures Markets on the World Stage Souza, Waldemar Antonio da Rocha de Brazilian ethanol Hedging Price risk Exchange rate risk Etanol - Mercados futuros Risco de preço Risco de taxa de câmbio |
title_short |
The Performance of U.S. Ethanol Futures Markets on the World Stage |
title_full |
The Performance of U.S. Ethanol Futures Markets on the World Stage |
title_fullStr |
The Performance of U.S. Ethanol Futures Markets on the World Stage |
title_full_unstemmed |
The Performance of U.S. Ethanol Futures Markets on the World Stage |
title_sort |
The Performance of U.S. Ethanol Futures Markets on the World Stage |
author |
Souza, Waldemar Antonio da Rocha de |
author_facet |
Souza, Waldemar Antonio da Rocha de Liu, Jingyu Yang, Xiaoyi Dahlgran, Roger |
author_role |
author |
author2 |
Liu, Jingyu Yang, Xiaoyi Dahlgran, Roger |
author2_role |
author author author |
dc.contributor.author.fl_str_mv |
Souza, Waldemar Antonio da Rocha de Liu, Jingyu Yang, Xiaoyi Dahlgran, Roger |
dc.subject.por.fl_str_mv |
Brazilian ethanol Hedging Price risk Exchange rate risk Etanol - Mercados futuros Risco de preço Risco de taxa de câmbio |
topic |
Brazilian ethanol Hedging Price risk Exchange rate risk Etanol - Mercados futuros Risco de preço Risco de taxa de câmbio |
description |
This study examines the feasibility of Brazilian ethanol dealers using the U.S. ethanol futures contracts as a price-risk managementvehicle. This application is appropriate given that the U.S. and Brazil are the world’s largest and second largest ethanol producers.This specific application is part of a larger consideration as to how U.S. futures markets perform for hedging international commodities.This study considers the reasons why U.S. ethanol contracts might and might not work as hedging vehicles for Brazilian ethanolinventories prior to conducting an empirical investigation. Our empirical hedge ratio model formulates three components of pricerisk for international users of U.S. futures markets. These are (1) the risk of commodity price change given the initial currencyexchange rate, (2) the risk of exchange rate change, given the commodity’s initial price, and (3) the risk of covariation between thecommodity’s price and the currency exchange rate. Based on these sources of price risk, the hedging portfolio consists of the U.S.ethanol futures contract and the Brazilian real futures contract. Our analysis reveals that the U.S. ethanol futures contract provideslittle price-risk protection for Brazilian ethanol holder while the Brazilian real futures contract offers some protection. In contract,we present results from crude oil futures markets in which the U.S. crude oil futures contract gives the bulk of price risk protectionand the currency futures contract provides much less. We conclude (1) that the ethanol findings are not universal and depend onthe provisions of the U.S. ethanol futures contract and (2) the contracts traded on the Brazilian futures exchange do not competedirectly with the U.S. contracts. |
publishDate |
2016 |
dc.date.none.fl_str_mv |
2016-06-10 2017-05-09T19:35:04Z 2017-05-09T19:35:04Z 2017-05-09 |
dc.type.driver.fl_str_mv |
info:eu-repo/semantics/article info:eu-repo/semantics/publishedVersion |
format |
article |
status_str |
publishedVersion |
dc.identifier.uri.fl_str_mv |
http://revista.dae.ufla.br/index.php/ora/article/view/836 SOUZA, W. A. da R. de; LIU, J.; YANG, X.; DAHLGRAN, R. The Performance of U.S. Ethanol Futures Markets on the World Stage. Organizações Rurais & Agroindustriais, Lavras, v. 18, n. 1, p. 13-24, jun. 2016. http://repositorio.ufla.br/jspui/handle/1/12906 |
url |
http://revista.dae.ufla.br/index.php/ora/article/view/836 http://repositorio.ufla.br/jspui/handle/1/12906 |
identifier_str_mv |
SOUZA, W. A. da R. de; LIU, J.; YANG, X.; DAHLGRAN, R. The Performance of U.S. Ethanol Futures Markets on the World Stage. Organizações Rurais & Agroindustriais, Lavras, v. 18, n. 1, p. 13-24, jun. 2016. |
dc.language.iso.fl_str_mv |
eng |
language |
eng |
dc.relation.none.fl_str_mv |
http://revista.dae.ufla.br/index.php/ora/article/view/836/509 |
dc.rights.driver.fl_str_mv |
info:eu-repo/semantics/openAccess |
eu_rights_str_mv |
openAccess |
dc.format.none.fl_str_mv |
application/pdf |
dc.publisher.none.fl_str_mv |
Organizações Rurais & Agroindustriais |
publisher.none.fl_str_mv |
Organizações Rurais & Agroindustriais |
dc.source.none.fl_str_mv |
Organizações Rurais & Agroindustriais; v. 18, n. 1 (2016) 2238-6890 1517-3879 reponame:Repositório Institucional da UFLA instname:Universidade Federal de Lavras (UFLA) instacron:UFLA |
instname_str |
Universidade Federal de Lavras (UFLA) |
instacron_str |
UFLA |
institution |
UFLA |
reponame_str |
Repositório Institucional da UFLA |
collection |
Repositório Institucional da UFLA |
repository.name.fl_str_mv |
Repositório Institucional da UFLA - Universidade Federal de Lavras (UFLA) |
repository.mail.fl_str_mv |
nivaldo@ufla.br || repositorio.biblioteca@ufla.br |
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1807835110485000192 |