DYNAMIC HEDGING OF INFLATION RISK

Udo Broll () and Stefan Schubert
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Udo Broll: Department of Business Management and Economics, Technische Universität Dresden, Helmholzstr. 10, 01062 Dresden, Germany

Annals of Financial Economics (AFE), 2009, vol. 05, issue 01, 1-13

Abstract: National and international investors are exposed to risk, stemming from volatile asset prices and inflation uncertainty. However investors can enter futures markets to hedge against these risks. The paper develops a dynamic hedging model, where the evolution of asset price, price level and futures price and hence real wealth is stochastic. For a risk averse investor, optimal dynamic consumption and hedging strategy are derived and discussed.

Keywords: Inflation risk; consumption; asset price; dynamic hedging; E21; E31 (search for similar items in EconPapers)
Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:wsi:afexxx:v:05:y:2009:i:01:n:s2010495209500031

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DOI: 10.1142/S2010495209500031

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