Dynamic optimal hedge ratio design when price and production are stochastic with jump

In this paper, we focus on the farmer’s risk income when using commodity futures, price and output processes are randomly correlated represented by jump-diffusion models. We evaluate expected utility of wealth determine optimal consumption rate hedging position at each point in time given harvest timing state variables. find a closed form for positioning case an investor with CARA utility. This result (see Table 3.3) is generalization Ho (J Financ 39:351–376, 1984), which considers special diffusion