Abstract:The article examines the forecasting performance of implied volatility from live cattle options contracts to forecast short-run volatility of live cattle futures. The problem is approached from a practical risk management perspective, that of a risk manager that uses live cattle futures prices to price beef inputs. Options prices, futures prices and short-term interest rate data are readily available, and the use of simple software to calculate implied volatilities is commonplace. The findings provide insight to agribusiness risk managers on how to adjust for bias and inefficiency of implied volatility, and provide insight into their information content.

　　Subjects:Volatility (finance); Risk management in business; Futures; Interest rates; Agricultural industries; Cattle feedlots; Dual-purpose cattle ranching and farming; Cattle

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