Abstract

ORTIZ ALVARADO, Arody  and  GIRON, Luis Eduardo. DAILY PROFITABILITY VOLATILITY FORECAST FOR THE SUGAR MARKET AND ITS APPLICATION FOR THE COVERAGE RATIO. Semest. Econ. [online]. 2015, vol.18, n.38, pp.105-136. ISSN 0120-6346.  https://doi.org/10.22395/seec.v18n38a4.

This work predicts the volatility of the daily profitability of sugar prices for the period between 1 of June 2001 and 24th of October 2013. The daily data collected covered sugar, ethanol and the Brazilian Real and USD exchange rate information. The models used were multivariate generalized conditional autoregressive volatility. Parting from the sugar price prediction, the coverage ratio for the minimum variance is calculated. Results show that the coverage ratio is 0.37. This means that in the case of a risk adverse producer that wants to eliminate a percentage of volatility of the world's sugar market daily profitability, and expects to sell 25 sugar contracts, 50,84 tons each, (1,271 tons), the optimal number of contracts with future coverage will be 9 and the number of contracts without coverage (spot price) will be 16.

Keywords : Price of commodities; Energy price; coverage ratio; non linear time series; sugar.

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