Calibration of Option‐Based Probability Assessments in Agricultural Commodity Markets

Abstract

Abstract A method for evaluating the reliability of option‐based price probability assessments is developed based on the calibration concept. Empirical tests using goodness‐of‐fit criteria are applied to four agricultural commodities. Results suggest that assessments in the corn and live cattle markets are reliable, but such assessments overstate the volatility of soybean prices and understate the location of hog prices.