This paper uses the expected utility framework to examine the optimal hedging decision for commodities with mean reverting price processes. The derived results show that when commodity prices follow a mean reverting process, the optimal hedge ratio differs significantly from the classical...

This note examines a situation in which hedging may actually increase a bank's exposure to risk. Especially in the case of financial institutions, there exists only a limited number of delivery dates for each futures contract and the delivery dates may not coincide with it the planning horizon...

This note studies the risk-management decisions of a risk-averse farmer. The farmer faces multiple sources of price uncertainty. He sells commodities to two markets at two prices, but only one of these markets has a futures market. We show that the farmer's optimal commodity futures market...