Trading and hedging the corn/ethanol crush spread using time-varying leverage and nonlinear models

In contribution to Dunis et al. [Modelling and Trading the Corn/Ethanol Crush Spread with Neural Networks. CIBEF Working Paper. Liverpool Business School. www.cibef.com ], this investigation endeavours to expand the selection of forecasting applications by delving further into the realm of artificia...

Celý popis

Uložené v:
Podrobná bibliografia
Vydané v:The European journal of finance Ročník 21; číslo 4; s. 352 - 375
Hlavní autori: Dunis, Christian L., Laws, Jason, Middleton, Peter W., Karathanasopoulos, Andreas
Médium: Journal Article
Jazyk:English
Vydavateľské údaje: London Routledge 16.03.2015
Taylor & Francis LLC
Predmet:
Algorithms
Artificial intelligence
Business schools
Commodities trading
Corn
corn futures
Economic forecasts
Ethanol
ethanol futures
Forecasting
genetic programming algorithm
Genetics
Grades (Scholastic)
Hedging
higher order neural network
leveraging
Mathematical models
multilayer perceptron neural network
Networks
Neural networks
Non-linear models
Nonlinear analysis
Risk adjustment
Risk management
RiskMetrics
spread trading
Studies
time-varying leverage
Volatility
ISSN:1351-847X, 1466-4364
On-line prístup:Získať plný text
Tagy: Pridať tag
Žiadne tagy, Buďte prvý, kto otaguje tento záznam!
Abstract In contribution to Dunis et al. [Modelling and Trading the Corn/Ethanol Crush Spread with Neural Networks. CIBEF Working Paper. Liverpool Business School. www.cibef.com ], this investigation endeavours to expand the selection of forecasting applications by delving further into the realm of artificial intelligence and nonlinear modelling. The performances of a multilayer perceptron (MLP) neural network and higher order neural network (HONN) are gauged against a genetic programming algorithm (GPA). Further to this, a time-varying volatility filter is applied by leveraging during lower volatility regimes in order to enhance the trading performance of the spread while avoiding trading completely during times of high volatility. This paper models the corn/ethanol crush spread over a six-year period commencing on 23 March 2005 (when the ethanol futures contract was first traded on Chicago Board of Trade) through to 31 December 2010. The spread acts as a good indicator of an ethanol producer's profit margin, with corn being the principal raw ingredient used in a process called 'corn crushing' to produce ethanol as a means for alternative energy. Without leveraging, the GPA achieves the highest risk-adjusted returns followed by the HONN model. Once a time-varying leverage strategy is introduced, the ranking is maintained as GPA continues to be the most profitable model with the HONN registering the second best risk-adjusted returns, followed by the MLP neural network. On that basis, and without the benefit of hindsight as in the real world, a fund manager would have selected the GPA model regardless of whether he decides to leverage or not. Furthermore, it is also observed that the time-varying leveraging strategy significantly improves annualised returns as well as reducing maximum drawdowns, two desirable outcomes for trading and hedging.
AbstractList In contribution to Dunis et al. [Modelling and Trading the Corn/Ethanol Crush Spread with Neural Networks. CIBEF Working Paper. Liverpool Business School. www.cibef.com ], this investigation endeavours to expand the selection of forecasting applications by delving further into the realm of artificial intelligence and nonlinear modelling. The performances of a multilayer perceptron (MLP) neural network and higher order neural network (HONN) are gauged against a genetic programming algorithm (GPA). Further to this, a time-varying volatility filter is applied by leveraging during lower volatility regimes in order to enhance the trading performance of the spread while avoiding trading completely during times of high volatility. This paper models the corn/ethanol crush spread over a six-year period commencing on 23 March 2005 (when the ethanol futures contract was first traded on Chicago Board of Trade) through to 31 December 2010. The spread acts as a good indicator of an ethanol producer's profit margin, with corn being the principal raw ingredient used in a process called 'corn crushing' to produce ethanol as a means for alternative energy. Without leveraging, the GPA achieves the highest risk-adjusted returns followed by the HONN model. Once a time-varying leverage strategy is introduced, the ranking is maintained as GPA continues to be the most profitable model with the HONN registering the second best risk-adjusted returns, followed by the MLP neural network. On that basis, and without the benefit of hindsight as in the real world, a fund manager would have selected the GPA model regardless of whether he decides to leverage or not. Furthermore, it is also observed that the time-varying leveraging strategy significantly improves annualised returns as well as reducing maximum drawdowns, two desirable outcomes for trading and hedging.
In contribution to Dunis et al. [Modelling and Trading the Corn/Ethanol Crush Spread with Neural Networks. CIBEF Working Paper. Liverpool Business School. www.cibef.com], this investigation endeavours to expand the selection of forecasting applications by delving further into the realm of artificial intelligence and nonlinear modelling. The performances of a multilayer perceptron (MLP) neural network and higher order neural network (HONN) are gauged against a genetic programming algorithm (GPA). Further to this, a time-varying volatility filter is applied by leveraging during lower volatility regimes in order to enhance the trading performance of the spread while avoiding trading completely during times of high volatility. This paper models the corn/ethanol crush spread over a six-year period commencing on 23 March 2005 (when the ethanol futures contract was first traded on Chicago Board of Trade) through to 31 December 2010. The spread acts as a good indicator of an ethanol producer's profit margin, with corn being the principal raw ingredient used in a process called 'corn crushing' to produce ethanol as a means for alternative energy. Without leveraging, the GPA achieves the highest risk-adjusted returns followed by the HONN model. Once a time-varying leverage strategy is introduced, the ranking is maintained as GPA continues to be the most profitable model with the HONN registering the second best risk-adjusted returns, followed by the MLP neural network. On that basis, and without the benefit of hindsight as in the real world, a fund manager would have selected the GPA model regardless of whether he decides to leverage or not. Furthermore, it is also observed that the time-varying leveraging strategy significantly improves annualised returns as well as reducing maximum drawdowns, two desirable outcomes for trading and hedging. Reprinted by permission of Routledge, Taylor and Francis Ltd.
In contribution to Dunis et al. [Modelling and Trading the Corn/Ethanol Crush Spread with Neural Networks. CIBEF Working Paper. Liverpool Business School. www.cibef.com], this investigation endeavours to expand the selection of forecasting applications by delving further into the realm of artificial intelligence and nonlinear modelling. The performances of a multilayer perceptron neural network and higher order neural network (HONN) are gauged against a genetic programming algorithm (GPA). This paper models the corn/ethanol crush spread over a six-year period commencing on Mar 23, 2005 (when the ethanol futures contract was first traded on Chicago Board of Trade) through to Dec 31, 2010. The spread acts as a good indicator of an ethanol producer's profit margin, with corn being the principal raw ingredient used in a process called 'corn crushing' to produce ethanol as a means for alternative energy. Without leveraging, the GPA achieves the highest risk-adjusted returns followed by the HONN model.
Author Dunis, Christian L.
Middleton, Peter W.
Laws, Jason
Karathanasopoulos, Andreas
Author_xml – sequence: 1
  givenname: Christian L.
  surname: Dunis
  fullname: Dunis, Christian L.
  organization: Banking and Finance, Liverpool John Moores University
– sequence: 2
  givenname: Jason
  surname: Laws
  fullname: Laws, Jason
  organization: Management School, University of Liverpool
– sequence: 3
  givenname: Peter W.
  surname: Middleton
  fullname: Middleton, Peter W.
  email: peter.william.middleton@gmail.com
  organization: Management School, University of Liverpool
– sequence: 4
  givenname: Andreas
  surname: Karathanasopoulos
  fullname: Karathanasopoulos, Andreas
  organization: Finance, London Metropolitan University
BookMark eNqFkE1P3DAQhi1EpfL1D3qI1AuXLOPYsZNeEEKlrYTEhUrcrFnb2TVy7MVOqPj3OGy5cGhPHkvP82rmPSaHIQZLyBcKKwodXFDW0o7Lh1UDlK06BpTDATmiXIiaM8EPy1yQemE-k-OcHwFASOBHZH2f0LiwqTCYamvNZpmnra10TOHCTlsM0Vc6zXlb5V2yaKo5vzFutPUzppfl4-2zTbixbyllOe-CxVSN0VifT8mnAX22Z3_fE_L75vv99c_69u7Hr-ur21q30Ex1KxlbcwtizaRpJSDnArhpGpS671uAXgvsUZgOZNMJ2SOnhmoqTKMHpnt2Qs73ubsUn2abJzW6rK33GGycs6KieFJQtqBfP6CPcU6hbFeotuskpQCF4ntKp5hzsoPaJTeWkxUFtRSv3otXS_FqX3zRvn3QtJtwcjFMCZ3_n3y5l10YYhrxT0zeqAlffExDwqBdVuyfCa_XCZ0S
CitedBy_id crossref_primary_10_1016_j_eswa_2020_113490
crossref_primary_10_1016_j_procs_2014_09_085
crossref_primary_10_3233_JIFS_179280
crossref_primary_10_1111_joes_12153
crossref_primary_10_1080_14697688_2016_1211796
crossref_primary_10_1111_1467_9698_5323
crossref_primary_10_1016_j_renene_2025_122854
Cites_doi 10.1080/09603100110044236
10.2307/2331231
10.1016/0025-5564(94)00057-7
10.1016/j.ejor.2003.08.037
10.2307/1913236
10.1007/3-540-32849-1_2
10.1364/AO.26.004972
10.1057/palgrave.jam.2240212
ContentType Journal Article
Copyright 2013 Taylor & Francis 2013
Copyright Taylor & Francis Ltd. 2015
Copyright_xml – notice: 2013 Taylor & Francis 2013
– notice: Copyright Taylor & Francis Ltd. 2015
DBID AAYXX
CITATION
8BJ
FQK
JBE
DOI 10.1080/1351847X.2013.830140
DatabaseName CrossRef
International Bibliography of the Social Sciences (IBSS)
International Bibliography of the Social Sciences
International Bibliography of the Social Sciences
DatabaseTitle CrossRef
International Bibliography of the Social Sciences (IBSS)
DatabaseTitleList
International Bibliography of the Social Sciences (IBSS)
International Bibliography of the Social Sciences (IBSS)
DeliveryMethod fulltext_linktorsrc
Discipline Business
EISSN 1466-4364
EndPage 375
ExternalDocumentID 3608429491
10_1080_1351847X_2013_830140
830140
Genre Article
GroupedDBID .7I
.QK
0BK
0R~
123
29G
4.4
5VS
8VB
AABCJ
AAFWJ
AAGDL
AAGZJ
AAHIA
AAMFJ
AAMIU
AAPUL
AATTQ
AAZMC
ABCCY
ABFIM
ABJNI
ABLIJ
ABPEM
ABTAI
ABXUL
ABXYU
ABZLS
ACGCV
ACGFS
ACHQT
ACTIO
ACTOA
ADAHI
ADCVX
ADKVQ
ADLRE
ADXPE
AECIN
AEFOU
AEISY
AEKEX
AEMXT
AEOZL
AEPSL
AEYOC
AEZRU
AFRVT
AGDLA
AGMYJ
AGRBW
AHDZW
AIJEM
AIYEW
AJWEG
AKBVH
AKVCP
ALMA_UNASSIGNED_HOLDINGS
ALQZU
AQTUD
AVBZW
AWYRJ
BEJHT
BLEHA
BMOTO
BOHLJ
CCCUG
CQ1
CS3
DGFLZ
DKSSO
EBS
EJD
E~B
E~C
G-F
GTTXZ
H13
HF~
HZ~
IPNFZ
J.O
KYCEM
M4Z
MS~
NA5
NW~
O9-
P2P
PQQKQ
QWB
RIG
RNANH
ROSJB
RSYQP
S-F
STATR
TASJS
TBQAZ
TDBHL
TEK
TFH
TFL
TFW
TNTFI
TRJHH
TUROJ
U5U
UT5
UT9
VAE
ZL0
~01
~S~
AAYXX
CITATION
8BJ
FQK
JBE
ID FETCH-LOGICAL-c502t-5733b4e06b37d570a44604d22a7c995009c6a9a6d80728679a41d1c16d2cf3c93
IEDL.DBID TFW
ISICitedReferencesCount 8
ISICitedReferencesURI http://www.webofscience.com/api/gateway?GWVersion=2&SrcApp=Summon&SrcAuth=ProQuest&DestLinkType=CitingArticles&DestApp=WOS_CPL&KeyUT=000349800300005&url=https%3A%2F%2Fcvtisr.summon.serialssolutions.com%2F%23%21%2Fsearch%3Fho%3Df%26include.ft.matches%3Dt%26l%3Dnull%26q%3D
ISSN 1351-847X
IngestDate Fri Sep 05 08:27:31 EDT 2025
Mon Nov 10 01:08:59 EST 2025
Sat Nov 29 06:39:37 EST 2025
Tue Nov 18 21:44:25 EST 2025
Mon Oct 20 23:45:40 EDT 2025
IsPeerReviewed true
IsScholarly true
Issue 4
Language English
LinkModel DirectLink
MergedId FETCHMERGED-LOGICAL-c502t-5733b4e06b37d570a44604d22a7c995009c6a9a6d80728679a41d1c16d2cf3c93
Notes ObjectType-Article-1
SourceType-Scholarly Journals-1
ObjectType-Feature-2
content type line 14
content type line 23
PQID 1658871100
PQPubID 32054
PageCount 24
ParticipantIDs proquest_journals_1658871100
informaworld_taylorfrancis_310_1080_1351847X_2013_830140
crossref_primary_10_1080_1351847X_2013_830140
proquest_miscellaneous_1672876139
crossref_citationtrail_10_1080_1351847X_2013_830140
PublicationCentury 2000
PublicationDate 2015-03-16
PublicationDateYYYYMMDD 2015-03-16
PublicationDate_xml – month: 03
  year: 2015
  text: 2015-03-16
  day: 16
PublicationDecade 2010
PublicationPlace London
PublicationPlace_xml – name: London
PublicationTitle The European journal of finance
PublicationYear 2015
Publisher Routledge
Taylor & Francis LLC
Publisher_xml – name: Routledge
– name: Taylor & Francis LLC
References CIT0031
CIT0034
CIT0011
CIT0022
Franken J. R. V. (CIT0015) 2003; 35
Ferreira C. (CIT0014) 2006
Fulcher J. (CIT0016) 2006
Dahlgran R. A. (CIT0008) 2009; 34
Dunis C. L. (CIT0009) 2006; 13
Koza J. R. (CIT0026) 1998
Brinker A. J. (CIT0004) 2009; 27
Appel G. (CIT0002) 1979
Morgan J. P. (CIT0030) 1997
McKay P. A. (CIT0029) 2006
Gallagher P. W. (CIT0018) 2009; 5
CIT0013
CIT0005
Holland J. (CIT0020) 1975
Koza J. R. (CIT0025) 1992
CIT0019
References_xml – volume: 35
  start-page: 1
  issue: 3
  year: 2003
  ident: CIT0015
  publication-title: Journal of Agricultural and Applied Economics
– ident: CIT0005
  doi: 10.1080/09603100110044236
– ident: CIT0031
  doi: 10.2307/2331231
– volume: 5
  start-page: 12
  issue: 1
  year: 2009
  ident: CIT0018
  publication-title: Federal Reserve Bank of St. Louis Regional Economic Development
– ident: CIT0022
  doi: 10.1016/0025-5564(94)00057-7
– ident: CIT0034
  doi: 10.1016/j.ejor.2003.08.037
– ident: CIT0013
  doi: 10.2307/1913236
– volume-title: Gene Expression Programming: Mathematical Modelling by an Artificial Intelligence
  year: 2006
  ident: CIT0014
  doi: 10.1007/3-540-32849-1_2
– volume-title: The Moving Average Convergence-Divergence Method
  year: 1979
  ident: CIT0002
– ident: CIT0019
  doi: 10.1364/AO.26.004972
– volume-title: Genetic Programming: On the Programming of Computers by Means of Natural Selection
  year: 1992
  ident: CIT0025
– start-page: 29
  volume-title: Encyclopedia of Computer Science and Technology
  year: 1998
  ident: CIT0026
– volume: 27
  start-page: 1
  issue: 1
  year: 2009
  ident: CIT0004
  publication-title: Journal of Agribusiness
– volume-title: The Application of Higher-Order Neural Networks to Financial Time Series. Artificial Neural Networks in Finance and Manufacturing
  year: 2006
  ident: CIT0016
– volume: 34
  start-page: 154
  issue: 1
  year: 2009
  ident: CIT0008
  publication-title: Journal of Agricultural and Resource Economics
– year: 2006
  ident: CIT0029
  publication-title: Wall Street Journal
– volume: 13
  start-page: 193
  issue: 3
  year: 2006
  ident: CIT0009
  publication-title: Neural Network World
– ident: CIT0011
  doi: 10.1057/palgrave.jam.2240212
– volume-title: Adaptation in Natural and Artificial Systems
  year: 1975
  ident: CIT0020
– volume-title: Risk Metrics Technical Document
  year: 1997
  ident: CIT0030
SSID ssj0006704
Score 2.0642214
Snippet In contribution to Dunis et al. [Modelling and Trading the Corn/Ethanol Crush Spread with Neural Networks. CIBEF Working Paper. Liverpool Business School....
SourceID proquest
crossref
informaworld
SourceType Aggregation Database
Enrichment Source
Index Database
Publisher
StartPage 352
SubjectTerms Algorithms
Artificial intelligence
Business schools
Commodities trading
Corn
corn futures
Economic forecasts
Ethanol
ethanol futures
Forecasting
genetic programming algorithm
Genetics
Grades (Scholastic)
Hedging
higher order neural network
leveraging
Mathematical models
multilayer perceptron neural network
Networks
Neural networks
Non-linear models
Nonlinear analysis
Risk adjustment
Risk management
RiskMetrics
spread trading
Studies
time-varying leverage
Volatility
Title Trading and hedging the corn/ethanol crush spread using time-varying leverage and nonlinear models
URI https://www.tandfonline.com/doi/abs/10.1080/1351847X.2013.830140
https://www.proquest.com/docview/1658871100
https://www.proquest.com/docview/1672876139
Volume 21
WOSCitedRecordID wos000349800300005&url=https%3A%2F%2Fcvtisr.summon.serialssolutions.com%2F%23%21%2Fsearch%3Fho%3Df%26include.ft.matches%3Dt%26l%3Dnull%26q%3D
hasFullText 1
inHoldings 1
isFullTextHit
isPrint
journalDatabaseRights – providerCode: PRVAWR
  databaseName: Taylor and Francis Online Journals
  customDbUrl:
  eissn: 1466-4364
  dateEnd: 99991231
  omitProxy: false
  ssIdentifier: ssj0006704
  issn: 1351-847X
  databaseCode: TFW
  dateStart: 19950301
  isFulltext: true
  titleUrlDefault: https://www.tandfonline.com
  providerName: Taylor & Francis
link http://cvtisr.summon.serialssolutions.com/2.0.0/link/0/eLvHCXMwpV1JS8QwFA4iIl7cxXEjgtdok7ZJcxRx8CCDB8W5lWxlBsZR2pn5_b7XZVBEBT2WbOU1b0tfvo-QCyXSwOMgmU_ShCGiF8u8NEworwtndBTbGmf2Xg0G2XCoHz7c4seySsyhiwYoorbVqNzGVl1F3BWSyoFRHWJhVnyZ1UkCGGHw_KiZj_3npSmWKmpYbVPOcER3d-6bST75pk_IpV8sde1--lv_f_FtstmGnvS62Ss7ZCVMd8l6V_m-Ryz4LfRkFOano-CRvohCfEghQZ1eBTxjf51QV86rEa3eINj0FMdCn_FLYAtT4o0pOgmgHGCk6lmmzWuaktaMO9U-eerfPt7csZaCgbk0EjOGaIk2CZG0sfKpigxkj1HihTDKaZ1CgOak0Ub6LFICsftMwj13XHrhitjp-ICswlLhkFCVcilEUFzYItEh01YG6wtjlEW6JN0jcSf83LX45EiTMcl5C2PaiS9H8eWN-HqELUe9Nfgcv_TPPn7XfFafixQNiUke_zz0pNsDeavoVc4hgoOck0fQfL5sBhXF_y5mGl7n2AdkoyBu0kd_X_2YbMBTiuVvXJ6Q1Vk5D6dkzS1m46o8q7f9O8VD_RU
linkProvider Taylor & Francis
linkToHtml http://cvtisr.summon.serialssolutions.com/2.0.0/link/0/eLvHCXMwrV1bSxwxFA5WS-2LWlup9dIIvqZOMpNk8ijiorhdfNjivoVMkkFhu8rMrr-_58xlqZQqiM-5cibnljn5PkKOtZCRp1GxkMmMIaIXy4NyTOhgSu9MkhYNzuxQj0b5ZGKuu2rCuiurxBy6bIEiGluNyo2X0X1J3AmyyoFVnWBlVvojb7KEd2RNgqtF-Pzx4GZpjJVOWl5byRkO6V_P_WeWJ97pCXbpP7a6cUCDzTfY-hbZ6KJPetoel09kJc62yYe--P0zKcB1oTOjsAC9jQEZjCiEiBRy1NlJxGv2-yn11aK-pfUDxJuB4ljoc_c7skdX4aMpOo2gH2Cnmllm7T5dRRvSnfoL-TU4H59dsI6FgXmZiDlDwMQii4kqUh2kThwkkEkWhHDaGyMhRvPKGadCnmiB8H0u44F7roLwZepNukNWYan4lVAtuRIiai6KMjMxN4WKRSid0wUyJpldkvbSt76DKEemjKnlHZJpLz6L4rOt-HYJW456aCE6Xuif__1h7by5GilbHhObPj90vz8EttP12nII4iDt5Ak0Hy2bQUvx14ubxfsF9gHZaAidzLfXr_6drF-Mfw7t8HJ0tUc-QovEajiu9snqvFrEA_LeP87v6uqw0YE_0uYBTg
linkToPdf http://cvtisr.summon.serialssolutions.com/2.0.0/link/0/eLvHCXMwpV1ba9swFBZdOspe1u5SmvUyDfaqxZJtyXosa0NLQ8hDxvImZEkmhTQNdtLfv3N8CQ1jG6zPunKsc5OPvo-Qr0qkgcdBMp-kCUNEL5Z5aZlQXhfO6ijOa5zZkRqPs9lMT5694seySsyhiwYoorbVqNwrX3QVcQMklQOjOsPCrPhbVicJr8g-RM4Sz_h0-HNri6WKGlrblDMc0j2e-8MsO85pB7r0N1Nd-5_h4ct3fkTetrEnvWwOyzuyF5bvyUFX-v6B5OC40JVRmJ_Og0f-IgoBIoUMdTkIeMn-uKCu3FRzWq0g2vQUx0Kf-4fAnmyJT6boIoB2gJWqZ1k227QlrSl3qo_kx_B6-v2GtRwMzKWRWDOES8yTEMk8Vj5VkYX0MUq8EFY5rVOI0Jy02kqfRUogeJ9NuOeOSy9cETsdH5MeLBVOCFUpl0IExUVeJDpkOpch94W1Kke-JN0ncSd841qAcuTJWBje4ph24jMoPtOIr0_YdtSqAej4R__s-Xc16_pipGhYTEz896Fn3RkwraZXhkMIB0knj6D5y7YZdBR_vNhleNxgH5CNgsBJf_r_1T-Tg8nV0Ixux3en5A00pFgKx-UZ6a3LTTgnr93T-r4qL2oN-AXCEAAA
openUrl ctx_ver=Z39.88-2004&ctx_enc=info%3Aofi%2Fenc%3AUTF-8&rfr_id=info%3Asid%2Fsummon.serialssolutions.com&rft_val_fmt=info%3Aofi%2Ffmt%3Akev%3Amtx%3Ajournal&rft.genre=article&rft.atitle=Trading+and+hedging+the+corn%2Fethanol+crush+spread+using+time-varying+leverage+and+nonlinear+models&rft.jtitle=The+European+journal+of+finance&rft.au=Dunis%2C+Christian+L.&rft.au=Laws%2C+Jason&rft.au=Middleton%2C+Peter+W.&rft.au=Karathanasopoulos%2C+Andreas&rft.date=2015-03-16&rft.pub=Routledge&rft.issn=1351-847X&rft.eissn=1466-4364&rft.volume=21&rft.issue=4&rft.spage=352&rft.epage=375&rft_id=info:doi/10.1080%2F1351847X.2013.830140&rft.externalDocID=830140
thumbnail_l http://covers-cdn.summon.serialssolutions.com/index.aspx?isbn=/lc.gif&issn=1351-847X&client=summon
thumbnail_m http://covers-cdn.summon.serialssolutions.com/index.aspx?isbn=/mc.gif&issn=1351-847X&client=summon
thumbnail_s http://covers-cdn.summon.serialssolutions.com/index.aspx?isbn=/sc.gif&issn=1351-847X&client=summon