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/79077/1/79077.pdf
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id	my-uitm-ir.79077
record_format	uketd_dc
spelling	my-uitm-ir.790772023-09-12T08:37:44Z Effective cross hedging: evidence from physical crude palm oil and its interrelated and non-interrelated agricultural and energy futures contracts / Ahmad Danial Zainudin 2018 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 https://ir.uitm.edu.my/id/eprint/79077/ https://ir.uitm.edu.my/id/eprint/79077/1/79077.pdf text en public masters Universiti Teknologi MARA (UiTM) Faculty of Business and Management Ahmad, Noryati
institution	Universiti Teknologi MARA
collection	UiTM Institutional Repository
language	English
advisor	Ahmad, Noryati
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
qualification_level	Master's degree
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
granting_institution	Universiti Teknologi MARA (UiTM)
granting_department	Faculty of Business and Management
publishDate	2018
url	https://ir.uitm.edu.my/id/eprint/79077/1/79077.pdf
_version_	1783736264391917568

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

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