Futures markets revolutionize risk management for competitive firms in uncertainty.
The article explores how commodity futures markets help firms manage risks. It looks at how firms make decisions about production, storage, and hedging under uncertain conditions. By combining models of futures trading with production and storage choices, the study shows how firms balance risk and optimize their processes. The research highlights the importance of inventories and futures hedging in managing risk and maximizing profits. Overall, the study provides a foundation for understanding how firms use futures markets to navigate uncertainty and make strategic decisions.