Hedging Short-Term Corn Price Risks in Tokyo Versus Chicago's Project a

OFOR Working Paper No. 00-02

25 Pages Posted: 13 Jul 2000

See all articles by Raymond M. Leuthold

Raymond M. Leuthold

University of Illinois @ Urbana-Champaign

Min-Kyoung Kim

Information and Communications University (ICU)

Date Written: January 2000

Abstract

This study investigates whether U.S. corn merchants can effectively manage the overnight price risk of cash corn purchased after the Chicago Board of Trade closes at 1:15 p.m. on either the electronic Project A market or in the corn contract traded on the Tokyo Grain Exchange. Three scenarios are examined: 1) overnight hedges; 2) day-to-day hedges; and 3) two-day hedges. Overnight hedges are the least effective of the three scenarios on both markets. E-hedging on Project A is more effective than hedging in Tokyo, yet trading of corn futures contracts on Project A remains relatively thin and illiquid. Steps need to be taken to encourage more trading of this contract.

JEL Classification: G13, G15, Q12, Q13

Suggested Citation

Leuthold, Raymond M. and Kim, Min-Kyoung, Hedging Short-Term Corn Price Risks in Tokyo Versus Chicago's Project a (January 2000). OFOR Working Paper No. 00-02, Available at SSRN: https://ssrn.com/abstract=229798 or http://dx.doi.org/10.2139/ssrn.229798

Raymond M. Leuthold (Contact Author)

University of Illinois @ Urbana-Champaign ( email )

1301 W. Gregory Drive
326 Mumford Hall
Urbana, IL 61801
United States
217-333-1810 (Phone)
217-333-5538 (Fax)

Min-Kyoung Kim

Information and Communications University (ICU) ( email )

P.O.Box 77
Yusong, Taejon, 305-600
Korea

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