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On the impact of feeding cost risk in aquaculture valuation and decision making
Umeå University, Faculty of Science and Technology, Department of Mathematics and Mathematical Statistics. Inland University of Applied Sciences, Lillehammer, Norway.
Umeå University, Faculty of Science and Technology, Department of Mathematics and Mathematical Statistics.ORCID iD: 0000-0003-2881-0905
2024 (English)In: Quantitative finance (Print), ISSN 1469-7688, E-ISSN 1469-7696, Vol. 24, no 9, p. 1341-1352Article in journal (Refereed) Published
Abstract [en]

We study the effect of stochastic feeding costs on animal-based commodities with particular focus on aquaculture. More specifically, we use soybean futures to infer on the stochastic behavior of salmon feed, which we assume to follow a Schwartz 2-factor model. We compare the decision of harvesting salmon using a decision rule assuming either deterministic or stochastic feeding costs. We identify cases, where accounting for stochastic feeding costs leads to significant improvements as well as cases where deterministic feeding costs are a good enough proxy. Nevertheless, in all of the cases, the newly derived rules show superior performance, while the additional computational costs are negligible. In conclusion, we recommend to use decision rules taking stochastic feeding costs into account.

Place, publisher, year, edition, pages
Routledge, 2024. Vol. 24, no 9, p. 1341-1352
Keywords [en]
Aquaculture, Commodity futures, Optimal stopping, Real options
National Category
Probability Theory and Statistics
Identifiers
URN: urn:nbn:se:umu:diva-221401DOI: 10.1080/14697688.2024.2308069ISI: 001161273200001Scopus ID: 2-s2.0-85184871027OAI: oai:DiVA.org:umu-221401DiVA, id: diva2:1840603
Available from: 2024-02-26 Created: 2024-02-26 Last updated: 2025-01-12Bibliographically approved

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Ewald, Christian OliverKamm, Kevin

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CiteExportLink to record
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Cite
Citation style
  • apa
  • ieee
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