Abstract
In static framework, many hedging strategies can be settled following the varioushedge ratios that have been developed in the literature. However, it is difficult tochoose among them the best the appropriate strategy according the to preference oreconomic behavior of the decision-maker such as prudence and temperance. This isso even with the hedging effectiveness measure. After introducing a hedging ratiothat take into account the prudence and temperance of the decision maker, we proposea ranking based approach to measure the effectiveness using L-moment to classifyhedge portfolios, hence hedge ratios, with regard to their performance. Moreover,we deal with the hedging issue in presence of quantity and rollover risks andderive an optimal strategy that depends upon the basis and insurance contract. Suchhedging issue includes the relevant risks encountered in practice and we relate howinsurance contract, specially designed for production risk could affect the futureshedge. The application on some agricultural futures prices data at hands shows thattaking into account quantity and rollover risks leads to better hedging strategy basedon the L-performance effectiveness measure.