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
Date Written: January 2000
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: Suggested Citation