The objective of this study is to investigate how professional traders in futures and options markets behave under risk and uncertainty. Our preliminary findings suggest that most traders exhibit concave utility functions for gains and convex utility functions for losses, while their weighting...

We analyze how the introduction of probability distortion and loss aversion in the standard hedging problem changes the optimal hedge ratio. Based on simulated cash and futures prices for soybeans, our results indicate that the optimal hedge changes considerably when probability distortion is...

This study examines formation and adaptation of reference prices by Manitoban grain producers. Research shows that preferences are reference-dependent and marketing decisions are affected by reference prices. Results suggest that Manitoban producers’ reference prices are formed primarily by an...

The disposition effect is one of the most common types of behavior documented in inancial markets, and reflects the notion that investors tend to hold losing positions too long and close winning positions too fast. This idea can also be applied to grain marketing. The disposition effect would be...