Wine price risk management: International diversification and derivative instruments

Kourtis, Apostolos, Markellos, Raphael and Psychoyios, Dimitrios (2012) Wine price risk management: International diversification and derivative instruments. International Review of Financial Analysis, 22. pp. 30-37.

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Variations in wine prices can be prominent and have widespread economic and financial implications. Although fine wine investments are dominated by French wines, we demonstrate that significant international diversification benefits exist for investors in Italian, Australian and Portuguese fine wines. We also show that diversification across varieties of French wine is not that effective. We propose the development of futures and options contracts on standardized wine price indices in order to enhance market completeness and to address the risk management needs of all market participants. Several popular continuous time processes are used to approximate empirically the dynamics of four fine wine price indices. On the basis of our results, we describe appropriate equilibrium models for pricing wine futures and option contracts.

Item Type: Article
Faculty \ School: Faculty of Social Sciences > Norwich Business School
UEA Research Groups: Faculty of Social Sciences > Research Groups > Finance Group
Faculty of Social Sciences > Research Centres > Centre for Competition Policy
Depositing User: Raphael Markellos
Date Deposited: 21 Feb 2012 09:30
Last Modified: 01 Feb 2024 01:39
DOI: 10.1016/j.irfa.2012.02.001

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