Optimal futures heading: Quadratic versus exponential utility functions

Donald Lien

Journal of Futures Markets, 2008, vol. 28, issue 2, 208-211

Abstract: Although quadratic and exponential utility functions both lead to mean‐variance expected utility analysis, this study demonstrates that the two approaches produce different optimal futures hedging decisions. Specifically, the deviation between the optimal production level and the optimal futures position is always smaller under the exponential utility framework. © 2008 Wiley Periodicals, Inc. Jrl Fut Mark 28: 208–211, 2008

Date: 2008
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