The information content of wheat derivatives regarding the Ukrainian war

We extract implied price densities from wheat options and futures prices during the first 17 months of the Ukrainian war. Changing differences between short- and long-term densities indicate that market expectations about the dynamics of the underlying changed over time. Before the signing of the Black Sea Grain Initiative, wheat derivatives prices showed predictive power for the further development of the conflict, and implied volatilities from wheat options were highly correlated with geopolitical risk (GPR). Afterwards, wheat prices lost their predictive power for the conflict, but instead reflected the market's opinion regarding the viability of the Black Sea Grain Initiative. By that time, correlations between wheat price risk and GPR dropped sharply.