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Effective cross hedging: evidence from physical crude palm oil and its interrelated and non-interrelated agricultural and energy futures contracts / Ahmad Danial Zainudin

Since its establishment, Crude Palm Oil futures contract (FCPO) has been used to hedge its physical crude palm oil (CPO) in cash market. However, due to the excessive speculation activities on crude palm oil futures market, the recent researchers found that FCPO to be no longer an effective hedging...

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Main Author: Zainudin, Ahmad Danial
Format: Thesis
Language:English
Published: 2018
Online Access:https://ir.uitm.edu.my/id/eprint/79077/2/79077.pdf
https://ir.uitm.edu.my/id/eprint/79077/
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spelling my.uitm.ir.790772024-08-05T07:46:30Z https://ir.uitm.edu.my/id/eprint/79077/ Effective cross hedging: evidence from physical crude palm oil and its interrelated and non-interrelated agricultural and energy futures contracts / Ahmad Danial Zainudin Zainudin, Ahmad Danial Since its establishment, Crude Palm Oil futures contract (FCPO) has been used to hedge its physical crude palm oil (CPO) in cash market. However, due to the excessive speculation activities on crude palm oil futures market, the recent researchers found that FCPO to be no longer an effective hedging tool to mitigate the price risk in cash market. This triggers the need for physical traders to find possible alternatives to ensure that the hedging role can be executed effectively. Therefore in this study, Ordinary Least Square, bivariate VAR and bivariate VECM were used to examine whether other interrelated and non-interrelated agricultural and energy futures contracts could serve as effective cross-hedging mechanisms for the CPO. Weekly data of agricultural and energy futures contracts from Chicago Board of Trade (CBOT), Intercontinental Exchange (ICE), New York Mercantile Exchange (NYMEX), Tokyo Commodity Exchange (TOCOM), and Dalian Commodity Exchange (DCE) are employed to cross hedge the physical crude palm oil prices. The study starts from 2006 until 2016. Empirical results indicate that bivariate VECM gives more hedging variance reduction. Overall FCPO is still the best futures contract for hedging purposes while Chicago Soybean (CBOTBO) provides the best alternative if cross hedging is considered. While Japanese crude oil futures (TOCOM) represents the energy futures market as the best cross hedge alternatives for CPO. 2018 Thesis NonPeerReviewed text en https://ir.uitm.edu.my/id/eprint/79077/2/79077.pdf Effective cross hedging: evidence from physical crude palm oil and its interrelated and non-interrelated agricultural and energy futures contracts / Ahmad Danial Zainudin. (2018) Masters thesis, thesis, Universiti Teknologi MARA (UiTM). <http://terminalib.uitm.edu.my/79077.pdf>
institution Universiti Teknologi Mara
building Tun Abdul Razak Library
collection Institutional Repository
continent Asia
country Malaysia
content_provider Universiti Teknologi Mara
content_source UiTM Institutional Repository
url_provider http://ir.uitm.edu.my/
language English
description Since its establishment, Crude Palm Oil futures contract (FCPO) has been used to hedge its physical crude palm oil (CPO) in cash market. However, due to the excessive speculation activities on crude palm oil futures market, the recent researchers found that FCPO to be no longer an effective hedging tool to mitigate the price risk in cash market. This triggers the need for physical traders to find possible alternatives to ensure that the hedging role can be executed effectively. Therefore in this study, Ordinary Least Square, bivariate VAR and bivariate VECM were used to examine whether other interrelated and non-interrelated agricultural and energy futures contracts could serve as effective cross-hedging mechanisms for the CPO. Weekly data of agricultural and energy futures contracts from Chicago Board of Trade (CBOT), Intercontinental Exchange (ICE), New York Mercantile Exchange (NYMEX), Tokyo Commodity Exchange (TOCOM), and Dalian Commodity Exchange (DCE) are employed to cross hedge the physical crude palm oil prices. The study starts from 2006 until 2016. Empirical results indicate that bivariate VECM gives more hedging variance reduction. Overall FCPO is still the best futures contract for hedging purposes while Chicago Soybean (CBOTBO) provides the best alternative if cross hedging is considered. While Japanese crude oil futures (TOCOM) represents the energy futures market as the best cross hedge alternatives for CPO.
format Thesis
author Zainudin, Ahmad Danial
spellingShingle Zainudin, Ahmad Danial
Effective cross hedging: evidence from physical crude palm oil and its interrelated and non-interrelated agricultural and energy futures contracts / Ahmad Danial Zainudin
author_facet Zainudin, Ahmad Danial
author_sort Zainudin, Ahmad Danial
title Effective cross hedging: evidence from physical crude palm oil and its interrelated and non-interrelated agricultural and energy futures contracts / Ahmad Danial Zainudin
title_short Effective cross hedging: evidence from physical crude palm oil and its interrelated and non-interrelated agricultural and energy futures contracts / Ahmad Danial Zainudin
title_full Effective cross hedging: evidence from physical crude palm oil and its interrelated and non-interrelated agricultural and energy futures contracts / Ahmad Danial Zainudin
title_fullStr Effective cross hedging: evidence from physical crude palm oil and its interrelated and non-interrelated agricultural and energy futures contracts / Ahmad Danial Zainudin
title_full_unstemmed Effective cross hedging: evidence from physical crude palm oil and its interrelated and non-interrelated agricultural and energy futures contracts / Ahmad Danial Zainudin
title_sort effective cross hedging: evidence from physical crude palm oil and its interrelated and non-interrelated agricultural and energy futures contracts / ahmad danial zainudin
publishDate 2018
url https://ir.uitm.edu.my/id/eprint/79077/2/79077.pdf
https://ir.uitm.edu.my/id/eprint/79077/
_version_ 1806692683894226944
score 13.211869

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