THE DESIGN AND PRICING OF FIXED AND MOVING WINDOW CONTRACTS: AN APPLICATION OF ASIAN-BASKET OPTION PRICING METHODS TO THE HOG FINISHING SECTOR

Renyuan Shao and Brian Roe

No 19823, 2002 Annual meeting, July 28-31, Long Beach, CA from American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association)

Abstract: Asian-Basket type moving window contracts are an increasingly used risk management tool in US hog sector. The moving window contract is decomposed into a portfolio of a long Asian-Basket put and a short Asian-Basket call option. A projected breakeven price is used to determine the floor price, and then Monte Carlo simulation methods are used to price both a moving and a fixed window contract. These methods provide unbiased pricing of fixed and moving window hog finishing contracts of one-year duration.

Keywords: Livestock; Production/Industries (search for similar items in EconPapers)
Pages: 28
Date: 2002
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Related works:
Journal Article: The design and pricing of fixed‐ and moving‐window contracts: An application of Asian‐Basket option pricing methods to the hog‐finishing sector (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea02:19823

DOI: 10.22004/ag.econ.19823

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