BASIS RISK AND THE DEMAND FOR COMMODITY DERIVATIVES IN BRAZIL / RISCO DE BASE E DEMANDA POR DERIVATIVOS AGROPECUÁRIOS NO BRASIL

AUTOR(ES)
DATA DE PUBLICAÇÃO

2009

RESUMO

Worldwide, the traded volume of commodity derivatives accounts for roughly 5% of the derivatives market. In Brazil, commodity derivatives are much less important, representing only 0.5% of the volume of derivatives traded at BM&F (the main derivatives exchange in Brazil), data concerning the first semester of 2008. The small importance of commodity derivatives at BM&F is somewhat surprising. After all, Brazil is one of the most important producers of commodities in the world. Conceivably, such a prominent role in the commodities markets should imply a large demand of commodity derivatives for hedging purposes. Why are the commodity derivatives markets relatively underdeveloped in Brazil? This dissertation shows that commodity futures poorly track the variation of commodity prices. The low correlation between futures and commodity prices - known in the literature as Basis Risk - makes futures contracts poor hedge instruments, thereby explaining at least part of the low importance of commodity derivatives in Brazil.

ASSUNTO(S)

derivatives commodities agronegocio derivativos commodities agribusiness

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