On the optimal hedge under unbiased futures prices

On the optimal hedge under unbiased futures prices

We derive both necessary and sufficient conditions for optimal hedge ratios to be a constant proportion of the physical position, independently of risk-averse agents' utility functions. Assumptions frequently employed in hedging studies are discussed in relation to the conditions derived.

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Veröffentlicht in:Economics letters 1995-03, Vol.47 (3), p.385-388
1. Verfasser: Lence, Sergio H.
Format: Artikel
Sprache:eng
Schlagworte:
Futures
Hedge ratio
Hedging
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Beschreibung
Zusammenfassung:We derive both necessary and sufficient conditions for optimal hedge ratios to be a constant proportion of the physical position, independently of risk-averse agents' utility functions. Assumptions frequently employed in hedging studies are discussed in relation to the conditions derived.
ISSN:0165-1765
1873-7374
DOI:10.1016/0165-1765(94)00575-M