Optimal Hedge Ratios for Property and Liability Insurance Companies

Hamid Rahmanx

Journal of Insurance Issues, 1992, vol. 15, issue 2, 83-96

Abstract: The development of futures and options markets has given an impetus to the search for hedging strategies that would most effectively reduce the risk of business operations. This paper develops a firm specific hedging model for a property and liability insurance company and demonstrates the determination of hedge ratios for a sample of ten such firms. Most of the firms in the sample needed to take a long position in futures. In all but one case, the model prescribes ratios that are significantly different from the naive strategies of not hedging or of hedging all transactions.

Date: 1992
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Persistent link: https://EconPapers.repec.org/RePEc:wri:journl:v:15:y:1992:i:2:p:83-96

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