Abstract:

【Objective】Under the background of random fluctuations in the wood market price, the effectiveness of purchasing put options to avoid the risk associated with such fluctuation was studied to generate risk-averse forestry enterprises and provide a decision-making reference.【Method】Based on the conditional value at risk (CVaR) measurement criteria, the optimal strategies of risk-averse forestry enterprises under the conditions of buying no options or buying put options were studied and the optimal strategies of two scenarios were compared.【Result】Planting scale, wood production, and the conditional risk value of forestry enterprises were found to decrease as risk aversion and unit area accumulation increases. Increasing the amount of option fee subsidies would likely expand the planting scale, but would reduce the enthusiasm to improve the unit area accumulation. Under the condition of a high option strike price, the planting scale, timber production and conditional values at risk would increase with the option strike price, while the unit area accumulation would likely decrease.【Conclusion】Fluctuating timber prices can be avoided and the adverse effects of risk aversion behavior can be reduced by purchasing put options to create risk-averse forestry enterprises. The government should take supporting measures and standardize the option market, encourage forestry enterprises to increase its quality input, and improve the unit area accumulation of planted forest land.

Key words: forestry enterprise, put option, risk aversion