Analysing White Maize Derivatives: Performance and Volatility in the SAFEX Market
Keywords:
Agricultural markets, GARCH models, Price risk management, South Africa, SAFEXAbstract
Objectives: to analyse risk management tools for market participants, specifically, white maize derivatives, focusing on performance and volatility in the SAFEX market. Prior work: The comprehension of the existing literature for the application of the GARCH model within the scope where the SAFEX has a role in the white maize serving as a commodity for food purposes and a base for a derivatives instrument. Approach: the research used a quantitative study design that involved using descriptive statistics, tests for stationarity, and an EGARCH model on futures prices from the months of 2009 to 2024. Implications: the market shows high persistence of volatility with strong negative leverage effects (bad news affects volatility more) and weak form efficiency with hedging efficiency of 81.96%. Results: this will be helpful for farmers and agri-businesses in ensuring revenue stability; for traders in pricing; and for policymakers in facilitating market-based risk management tools usage. Value: This study presents new evidence to support the high efficacy of the regional food product for which such asymmetrical welfare models are necessary and confirms the important place of SAFEX in the field of economics and the resilience of food security
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