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Article: Production decisions in the presence of options. A note

TitleProduction decisions in the presence of options. A note
Authors
KeywordsCommodity options
Production
Prudence
Issue Date2002
PublisherElsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/iref
Citation
International Review Of Economics And Finance, 2002, v. 11 n. 1, p. 17-25 How to Cite?
AbstractThis paper examines the behavior of the competitive firm under uncertainty in the presence of commodity options. We show that the risk-averse firm always uses fairly priced commodity options for hedging purposes. However, unlike the case of forward/futures contracts, the presence of fairly priced commodity options cannot induce the firm to produce up to the certainty equivalent level. We further show that risk aversion alone is not enough to make the firm more eager to produce in the presence of fairly priced commodity options. To establish this intuitively appealing result, the notion of prudence is also called for. © 2002 Elsevier Science Inc. All rights reserved.
Persistent Identifierhttp://hdl.handle.net/10722/85698
ISSN
2015 Impact Factor: 1.846
2015 SCImago Journal Rankings: 0.890
References

 

DC FieldValueLanguage
dc.contributor.authorWong, KPen_HK
dc.date.accessioned2010-09-06T09:08:09Z-
dc.date.available2010-09-06T09:08:09Z-
dc.date.issued2002en_HK
dc.identifier.citationInternational Review Of Economics And Finance, 2002, v. 11 n. 1, p. 17-25en_HK
dc.identifier.issn1059-0560en_HK
dc.identifier.urihttp://hdl.handle.net/10722/85698-
dc.description.abstractThis paper examines the behavior of the competitive firm under uncertainty in the presence of commodity options. We show that the risk-averse firm always uses fairly priced commodity options for hedging purposes. However, unlike the case of forward/futures contracts, the presence of fairly priced commodity options cannot induce the firm to produce up to the certainty equivalent level. We further show that risk aversion alone is not enough to make the firm more eager to produce in the presence of fairly priced commodity options. To establish this intuitively appealing result, the notion of prudence is also called for. © 2002 Elsevier Science Inc. All rights reserved.en_HK
dc.languageengen_HK
dc.publisherElsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/irefen_HK
dc.relation.ispartofInternational Review of Economics and Financeen_HK
dc.rightsInternational Review of Economics & Finance. Copyright © Elsevier BV.en_HK
dc.subjectCommodity optionsen_HK
dc.subjectProductionen_HK
dc.subjectPrudenceen_HK
dc.titleProduction decisions in the presence of options. A noteen_HK
dc.typeArticleen_HK
dc.identifier.openurlhttp://library.hku.hk:4550/resserv?sid=HKU:IR&issn=1059-0560&volume=11&spage=17&epage=25&date=2002&atitle=Production+Decisions+in+the+Presence+of+Options:+A+Noteen_HK
dc.identifier.emailWong, KP: kpwongc@hkucc.hku.hken_HK
dc.identifier.authorityWong, KP=rp01112en_HK
dc.description.naturelink_to_subscribed_fulltext-
dc.identifier.doi10.1016/S1059-0560(01)00102-2en_HK
dc.identifier.scopuseid_2-s2.0-0036230589en_HK
dc.identifier.hkuros71447en_HK
dc.relation.referenceshttp://www.scopus.com/mlt/select.url?eid=2-s2.0-0036230589&selection=ref&src=s&origin=recordpageen_HK
dc.identifier.volume11en_HK
dc.identifier.issue1en_HK
dc.identifier.spage17en_HK
dc.identifier.epage25en_HK
dc.publisher.placeNetherlandsen_HK
dc.identifier.scopusauthoridWong, KP=7404759417en_HK

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