We address the problem of hedging inventory risk for a short lifecycle or seasonal item when its demand is correlated with the price of a financial asset. We show how to construct optimal hedging transactions that minimize the variance of profit and increase the expected utility for a risk-averse decision-maker. We show that for a wide range of hedging strategies and utility functions, a risk-a...

This paper is concerned with the risk management practices of an electricity retailer motivated by Dutch market. We examine effectiveness existing base- and peak-load futures contracts as a tool for retailers. analytically characterize retailer’s optimal hedging policy function serial correlation prices demand profiles its customers. find that typically over-hedges in market, over-hedging amoun...

despite the importance of hedging in academic productions, its use in different disciplines and genres has been given little attention (hyland, 1998; crystal, 1995). more precisely, the role of different genders as contributors to this social phenomenon (i.e., research articles) has been taken as neutral, as if gender is inconsequential in identity construction. the studies done in english sugg...

one tactful strategy in political rhetoric is hedging which is associated with vagueness and innuendos. despite the studies that address hedging in academic discourse and conversation analysis, studies that investigate hedges in relation to political power, face, and politeness are tremendously few. to this aim, four political interviews were selected from cnn and bbc websites on the basis of t...

In variable environments, organisms must have strategies to ensure fitness as conditions change. For plants, germination can time emergence with favourable conditions for later growth and reproduction (predictive germination), spread the risk of unfavourable conditions (bet hedging) or both (integrated strategies). Here we explored the adaptive value of within- and among-year germination timing...

The basic contracts traded on energy exchanges are swaps. They involve fixed-rate payments for the delivery of electricity over a certain period of time. It has been shown that options on these swaps (called electricity swaptions) can be priced efficiently using a Hilbert space-valued timeinhomogeneous jump-diffusion model for the forward curve. We consider the mean-variance hedging problem for...

This paper addresses several questions surrounding volatility forecasting and its use in the estimation of optimal hedging ratios. Specifically: Are there economic gains by nesting time-series econometric models (GARCH) and dynamic programming models (therefore forecasting volatility several periods out) in the estimation of hedging ratios whilst accounting for volatility in the futures bid–ask...

We study a discrete time hedging and pricing problem in a market with liquidity costs. Using Leland’s discrete time replication scheme [Leland, H.E., 1985. Journal of Finance, 1283–1301], we consider a discrete time version of the Black–Scholes model and a delta hedging strategy. We derive a partial differential equation for the option price in the presence of liquidity costs and develop a modi...

We measure asset price jumps by the hedging error they induce on a delta-hedged position of European options. Based on high frequency data, we propose a nonparametric estimator for this measure and a test for its positivity. We further construct a Kolmogorov-type test for the presence of jump hedging errors for a possibly infinite-dimensional family of options based on the worst-case contract i...

In this paper, the financial engineering minimum risk-based portfolio hedging model is first analyzed. It is then followed by the investigation on various major estimation methods for the minimum risk hedge ratio. The results revealed in the current study show that the HR obtained by the ordinary least squares (OLS) model is maximal and the out-of-sample hedging performance is the best; however...