Optimal Sequential Futures Trading

Hedgers adjust their futures market positions to reflect new information. Therefore, the anticipation of new information creates future decision points and thus a multiperiod decision problem. Previous studies (see [2], [4], [5], [7], and [8]) which solved the problem of choosing optimal futures mar...

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Bibliographic Details
Published in:Journal of financial and quantitative analysis 1982-12, Vol.17 (5), p.683-695
Main Authors: Baesel, Jerome, Grant, Dwight
Format: Article
Language:English
Subjects:
Cash
Crops
Expected values
Forward contracts
Futures contracts
Futures market
Futures markets
Futures trading
Grains
Hedging
Market positioning
Market prices
Mathematical models
Objective functions
Optimal
Prices
Sequence
Supply
Uncertainty
Zero
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Summary:Hedgers adjust their futures market positions to reflect new information. Therefore, the anticipation of new information creates future decision points and thus a multiperiod decision problem. Previous studies (see [2], [4], [5], [7], and [8]) which solved the problem of choosing optimal futures market hedges have not addressed this issue. Rather, these studies have derived optimal hedges in one-period frameworks. In general, this solution is incorrect if, during the time the hedge is in effect, new information is anticipated.
ISSN:0022-1090
1756-6916
DOI:10.2307/2330856