Hedging Risks & Strategies under Energy and Food Crisis

Ruoyi Liu

doi:10.54097/1q86x343

Authors

Ruoyi Liu

DOI:

https://doi.org/10.54097/1q86x343

Keywords:

Energy Crisis; Price Fluctuation; Hedging Strategy; Risk Management.

Abstract

Oil, gas and food are essential for modern human life. The price fluctuation of these things will significantly affect the economy of the world. This essay discusses the price changes of energy, bulk food, and hedging financial assets against the backdrop of global uncertainty, influenced by geopolitical conflicts such as the Russia-Ukraine war and the Saudi oil renewal crisis, as well as factors like the COVID-19 pandemic and climate change. The prices of energy sources are highly volatile from geopolitical influences. The prices of bulk food commodities fluctuate around a baseline level, with specific trends varying by type of food. Hedging financial assets like gold and Bitcoin have seen gradual increases in price with some volatility. Companies develop their hedging strategies based on the prices of these derivatives, holding different quantities of risk assets and adjusting their asset holdings based on expectations of changes in the prices of these derivatives.

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