The hedging pressure hypothesis and the risk premium in the soybean reverse crush spread
Date
2022-03
Authors
Li, Ziran
Major Professor
Advisor
Committee Member
Journal Title
Journal ISSN
Volume Title
Publisher
© 2021 Wiley Periodicals LLC
Abstract
This article formalizes Keynes’s hypothesis that the need to attract speculative capital to match hedgers’ trades will create a difference between the futures and expected maturity price. We expand this analysis to the soybean complex where we have speculator and hedgers in soybeans, soybean meal and soybean oil. We focus on the crush spread because it is unlikely that hedgers will want to make simultaneous trades on the opposite side of soybean crushers in all three markets. We find strong evidence of a positive return to speculators who provide this liquidity.
Series Number
Journal Issue
Is Version Of
Versions
Series
Academic or Administrative Unit
Type
article
Comments
This is the peer reviewed version of the following article: Li, Ziran, and Dermot J. Hayes. "The hedging pressure hypothesis and the risk premium in the soybean reverse crush spread." Journal of Futures Markets 42, no. 3 (2022): 428-445, which has been published in final form at doi:10.1002/fut.22285. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions. This article may not be enhanced, enriched or otherwise transformed into a derivative work, without express permission from Wiley or by statutory rights under applicable legislation. Copyright notices must not be removed, obscured or modified. The article must be linked to Wiley’s version of record on Wiley Online Library and any embedding, framing or otherwise making available the article or pages thereof by third parties from platforms, services and websites other than Wiley Online Library must be prohibited.