EconPapers    
Economics at your fingertips  
 

How firms should hedge: An extension

Olaf Korn

Journal of Futures Markets, 2010, vol. 30, issue 9, 834-845

Abstract: This note studies a firm's optimal hedging strategy with tailor‐made exotic derivatives under both price risk and quantity risk. It extends the analysis of Brown G. W. and Toft K.‐B. (2002) by relaxing the assumption of a bivariate normal distribution. The optimal payoff function of a derivative contract is characterized in terms of the expectation and variance of the quantity, conditional on the price. This main result is illustrated by different examples, stressing the importance of the dependence structure between price risk and quantity risk for the choice of appropriate hedging instruments. © 2009 Wiley Periodicals, Inc. Jrl Fut Mark 30:834–845, 2010

Date: 2010
References: Add references at CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed

Downloads: (external link)
http://hdl.handle.net/

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:jfutmk:v:30:y:2010:i:9:p:834-845

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0270-7314

Access Statistics for this article

Journal of Futures Markets is currently edited by Robert I. Webb

More articles in Journal of Futures Markets from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley Content Delivery ().

 
Page updated 2019-03-19
Handle: RePEc:wly:jfutmk:v:30:y:2010:i:9:p:834-845