A Simple Multiperiod Minimum Risk Hedge Model

A multiperiod hedging model is developed that is simpler than other multiperiod models in the literature. The model permits periodic adjustment of the hedge while minimizing the producer's profit variance. Minimum risk hedge ratios are calculated for steers, cows, hogs, com, and soybeans using the full model with hedge adjustments every two months. These ratios are compared to those using the model without periodic hedge adjustments and to a simple single‐period model. The results suggest that simple models may work well for simple hedges, while the full model is best for more complex hedging situations such as cross hedges.