The market price of risk is conceptually one of the most critical artifacts of modern finance, since it provides the linkage between equilibrium and arbitrage models of derivatives pricing. In this paper, the market price of risk is derived for options on live cattle futures contracts It provides a technique to extract the implied market price of risk (iMPR), which is conceptually similar to that used in extracting implied volatilities. It is shown that the iMPR is not linear across strike prices astheory suggests it should.
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