Optimal Hedging under Price and Quantity Uncertainty: The Case of a Cocoa Producer

1980 ◽  
Vol 88 (1) ◽  
pp. 100-116 ◽  
Author(s):  
Jacques Rolfo
Keyword(s):  
Optimal Hedging

A portfolio approach to optimal hedging for a commercial cattle feedlot

1987 ◽  
Vol 7 (4) ◽  
pp. 443-457 ◽  
Author(s):  
Paul E. Peterson ◽  
Raymond M. Leuthold
Keyword(s):  
Optimal Hedging ◽  
Portfolio Approach ◽  
Cattle Feedlot

scholarly journals Variance optimal hedging for continuous time additive processes and applications

Stochastics ◽  
2013 ◽  
Vol 86 (1) ◽  
pp. 147-185 ◽  
Author(s):  
Stéphane Goutte ◽  
Nadia Oudjane ◽  
Francesco Russo
Keyword(s):  
Continuous Time ◽  
Additive Processes ◽  
Optimal Hedging

Optimal hedging and spreading on wheat futures markets

1989 ◽  
Vol 9 (2) ◽  
pp. 163-170 ◽  
Author(s):  
Da-Hsiang Donald Lien
Keyword(s):  
Futures Markets ◽  
Optimal Hedging

Optimal Hedging with Basis Risk under Mean-Variance Criterion

2017 ◽  
Author(s):  
Jingong Zhang ◽  
Ken Seng Tan ◽  
Chengguo Weng
Keyword(s):  
Basis Risk ◽  
Optimal Hedging ◽  
Mean Variance ◽  
Variance Criterion

Toward an optimal hedging strategy considering earnings volatility through fair value accounted financial derivatives

2016 ◽  
Vol 17 (3) ◽  
pp. 310-327
Author(s):  
Eva Marie Ebach ◽  
Michael Hertel ◽  
Andreas Lindermeir ◽  
Timm Tränkler
Keyword(s):  
Fair Value ◽  
Income Smoothing ◽  
Sensitivity Analyses ◽  
Financial Industry ◽  
Fair Value Accounting ◽  
Trade Off ◽  
Content Type ◽  
Earnings Volatility ◽  
Market Values ◽  
Optimal Hedging

Purpose The purpose of this paper is to determine a financial institution's optimal hedging degree under consideration of costly earnings volatility induced by fair value accounted derivatives. The discussion on the adoption of fair value accounting in the financial industry has been rather controversial in recent years. Under this accounting regime, the change in market values of specific assets must be considered as profit or loss. Critics argue that fair value accounting induces higher earnings volatility compared to historical cost accounting and, therefore, may initiate a downward spiral during recessions. Thus, increased earnings volatility induces costs, which can be explained by disappointed capital market expectations. Consequently, in general, a lowering of earnings volatility will be rewarded. Consistent with this theoretical finding, empirical research provides strong evidence that companies pursue income smoothing to reduce earnings volatility. In contrast to industrial corporations, financial institutions may easily reduce their earnings volatility by engaging in additional hedging activities. However, more intense hedging usually reduces expected profits. Design/methodology/approach Based on a research project initiated by a large German bank, this study quantitatively models the trade-off between the (utility of) costs of earnings volatility and the reduction of profit potential through additional hedging. Findings By conducting sensitivity analyses and simulations of the crucial factors of the trade-off, we examine relevant causal relationships to obtain first indications about the economic benefits of income smoothing. Originality/value To the best of our knowledge, we are the first to develop an optimization model that supports decision-making by attempting to determine an optimal (additional) hedging degree considering the costs induced by earnings volatility.

scholarly journals Utility based optimal hedging in incomplete markets

2002 ◽  
Vol 12 (2) ◽  
pp. 691-709 ◽  
Author(s):  
M. P. Owen
Keyword(s):  
Incomplete Markets ◽  
Optimal Hedging

Optimal hedging for fund and insurance managers with partially observable investment flows

2014 ◽  
Vol 15 (3) ◽  
pp. 535-551 ◽  
Author(s):  
Masaaki Fujii ◽  
Akihiko Takahashi
Keyword(s):  
Optimal Hedging ◽  
Partially Observable

Dynamic multiproduct optimal hedging in the soybean complex – do time-varying correlations provide hedging improvements?

2014 ◽  
Vol 46 (27) ◽  
pp. 3312-3322 ◽  
Author(s):  
Hernan A. Tejeda ◽  
Barry K. Goodwin
Keyword(s):  
Time Varying ◽  
Optimal Hedging

scholarly journals Optimal Hedging Under Fast-Varying Stochastic Volatility

2020 ◽  
Vol 11 (1) ◽  
pp. 274-325 ◽  
Author(s):  
Josselin Garnier ◽  
Knut Sølna
Keyword(s):  
Stochastic Volatility ◽  
Optimal Hedging
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