Infinite-Horizon Optimal Hedging Under Cone Constraints

Kevin Huang ()

Working Papers from Minnesota - Center for Economic Research

Abstract: We address the issue of hedging in infinite horizon markets with a type of constraints that the set of feasible portfolio holdings forms a convex cone. We show that the minimum cost of hedging a liability stream is equal to its largest present value with respect to admissible stochastic discount factors, thus can be determined without finding an optimal hedging strategy

Keywords: FINANCIAL MARKET; HEDGING (search for similar items in EconPapers)
JEL-codes: C61 G10 G20 (search for similar items in EconPapers)
Pages: 22 pages
Date: 1999
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Persistent link: https://EconPapers.repec.org/RePEc:fth:minner:304

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