I G.A. Anom Yudistira


This research aims at procuring a model in transferring risk due to uncertainty (fluctuation) of commodity price’s that constitutes raw materials of agroindustry. Thus, this research is expected to give advantage to farmers and agroindustrial entrepreneurs in Indonesia in facing commodity markets that are becoming more liberal. Commodities tried out in this research are fresh fruit bunches (FFB) of which the price refers to the CPO spot price at Malaysia Derivatives Exchange (MDEX).

The risk transfer system that will be developed here takes advantage of financial  markets  to  muffle  risk  at  commodity level.  Risk  in  the  commodity market is transferred through a risk-transfer instrument. It will provide accumulation of loss, gain or neutral during the certain period of time range. Formulation  of  this  instrument  is  derived  from  the  theory  of  geometrical Brownian random movement, as explained by Hull (2000). Formulation given is upper and lower limits of commodity’s price in certain periods of time to come. When the price drops, reaching under lower limit, so loss will occur, and on the contrary, when the price rises, exceeding the upper limit, so gain will occur. Gain or loss does not occur if the price moves between lower and upper limits.


risk, risk transfer, financial investment, mutual fund contract, derivatives exchange, geometrical brownian random movement


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