Hedging Efficiency of Atlantic Salmon Futures

Aquaculture Economics & Management Volume 20, 2016 - Issue 4: New Market Transaction Mechanisms and Productivity Growth Enhance Aquaculture Production

24 Pages Posted: 20 Oct 2017

See all articles by Bard Misund

Bard Misund

University of Stavanger

Frank Asche

Stavanger University College

Date Written: August 24, 2016

Abstract

This paper examines the hedging properties of Atlantic salmon futures. Hedging is important since it allows for mitigation of the risk of adverse price changes in the spot market. We examine the hedging efficiency of three types of hedging strategies; unhedged, fully hedged and hedging using optimal hedging ratios. To find the optimal hedge ratio we use an estimated constant hedge ratio, optimal hedge ratios estimated with rolling 20-week and 52-week windows, and bivariate GARCH models. The results provide evidence that hedging using futures contracts listed on Fish Pool reduces risk for producers of farmed Atlantic salmon. The best hedging efficiency is achieved with a simple one-to-one hedge, closely followed by the bivariate GARCH approach.

Keywords: Atlantic salmon markets, Forward prices, Risk premium, Hedging, Hedging efficiency, Hedging strategies, Futures prices, Fish Pool, Multivariate GARCH, Salmon, Commodities

JEL Classification: G13, G14, Q22

Suggested Citation

Misund, Bard and Asche, Frank, Hedging Efficiency of Atlantic Salmon Futures (August 24, 2016). Aquaculture Economics & Management Volume 20, 2016 - Issue 4: New Market Transaction Mechanisms and Productivity Growth Enhance Aquaculture Production . Available at SSRN: https://ssrn.com/abstract=3056153

Bard Misund (Contact Author)

University of Stavanger ( email )

PO Box 8300 Forus
Stavanger
Norway

HOME PAGE: http://www.uis.no/article.php?articleID=76145&categoryID=11199

Frank Asche

Stavanger University College ( email )

PO Box 2557
Ullandhaug
4004 Stavanger
Norway

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