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Futures hedges can be rolled forward from a nearby to a more distant delivery month and can be rolled backwards from a distant to a

Futures hedges can be rolled forward from a nearby to a more distant delivery month and can be rolled backwards from a distant to a nearby delivery month. Considering a grain producer who uses futures contracts to sell his grain, (i) discuss why this producer would roll his hedge backward and (ii) create and explain two numerical examples to illustrate how a backward-rolling hedge works. One example should address a case when futures prices are going up and the other example should address a case when futures prices are going down.

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