Delivery Horizon and Grain Market Volatility

Journal of Futures Markets, Forthcoming

Posted: 18 Aug 2009 Last revised: 12 Apr 2012

Berna Karali

University of Georgia

Jeffrey H. Dorfman

University of Georgia

Walter N. Thurman

North Carolina State University; PERC - Property and Environment Research Center

Date Written: November 10, 2009

Abstract

We study the difference in the volatility dynamics of CBOT corn, soybeans, and oats futures prices across different delivery horizons via a smoothed Bayesian estimator. We find that futures price volatilities in these markets are affected by inventories, time to delivery, and the crop progress period and that there are important differences in the effects across delivery horizons. We also find that price volatility is higher before the harvest starts in most cases compared to the volatility during the planting period. These results have implications for hedging, options pricing, and the setting of margin requirements.

Keywords: Bayesian econometrics, futures markets, seasonality, theory of storage, volatility

JEL Classification: C11, G10, Q14

Suggested Citation

Karali, Berna and Dorfman, Jeffrey H. and Thurman, Walter N., Delivery Horizon and Grain Market Volatility (November 10, 2009). Journal of Futures Markets, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1456555

Berna Karali (Contact Author)

University of Georgia ( email )

Athens, GA 30602
United States

Jeffrey H. Dorfman

University of Georgia ( email )

Athens, GA 30602-6254
United States

Walter N. Thurman

North Carolina State University ( email )

Hillsborough Street
Raleigh, NC 27695
United States

PERC - Property and Environment Research Center

2048 Analysis Drive
Suite A
Bozeman, MT 59718
United States

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