Hedging global environment risks: An option based portfolio insurance

André de Palma () and Jean-Luc Prigent

No 2007-09, THEMA Working Papers from THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise

Abstract: This paper introduces a financial hedging model for global environment risks. Our approach is based on portfolio insurance under hedging constraints. Investors are assumed to maximize their expected utilities defined on financial and environmental asset values. The optimal investment is determined for quite general utility functions and hedging constraints. In particular, our results suggest how to introduce derivative assets written on the environmental asset.

Keywords: utility maximization; hedging; environmental asset; martingale theory (search for similar items in EconPapers)
JEL-codes: C6 G11 G24 L10 (search for similar items in EconPapers)
Date: 2007
New Economics Papers: this item is included in nep-agr, nep-bec, nep-env, nep-ias and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Working Paper: Hedging global environment risks: An option based portfolio insurance (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:ema:worpap:2007-09

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