CROSS HEDGING WITHIN A LOG MEAN REVERTING MODEL

Samuel Njoh ()
Additional contact information
Samuel Njoh: Université de Marne-La-Vallée, Cité Descartes, 5, Bld Descartes, Champs-Sur-Marne, F-77454 Marne-La-Valle Cedex 2, France

International Journal of Theoretical and Applied Finance (IJTAF), 2007, vol. 10, issue 05, 887-914

Abstract: We hedge options on electricity spot prices by cross hedging, i.e., by using another financial asset. We calculate hedging strategies by quadratic minimization and local risk minimization. In our model of energy markets, we have done a deep study of no arbitrage and of the existence of martingale measures with square integrable density. Then we have established tools for efficient hedges. Nevertheless, we have clearly proved possible limitations of the expiry of options with quadratic criteria.

Keywords: Hedging; incomplete markets; hedging numéraire; minimal variance martingale measure; mean reverting models (search for similar items in EconPapers)
Date: 2007
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.worldscientific.com/doi/abs/10.1142/S0219024907004457
Access to full text is restricted to subscribers

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:wsi:ijtafx:v:10:y:2007:i:05:n:s0219024907004457

Ordering information: This journal article can be ordered from

DOI: 10.1142/S0219024907004457

Access Statistics for this article

International Journal of Theoretical and Applied Finance (IJTAF) is currently edited by L P Hughston

More articles in International Journal of Theoretical and Applied Finance (IJTAF) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().