How should price models be chosen for real option valuation and how should real option cash flows be hedged in the presence of model error? We consider a specific type of model error in the context of the natural gas storage real option: The assumed number of factors in a multifactor futures price model differs from the true number of factors. In terms of valuation, model error does not seem to...

In this paper, we consider the hedging of portfolio loss derivatives using single-name credit default swaps as hedging instruments. The hedging issue is investigated in a general pure jump dynamic setting where default times are assumed to admit a joint density. In a first step, we compute default intensities adapted to the global filtration of defaults. In particular, we stress the impact of a...

Bet-hedging theory addresses how individuals should optimize fitness in varying and unpredictable environments by sacrificing mean fitness to decrease variation in fitness. So far, three main bet-hedging strategies have been described: conservative bet-hedging (play it safe), diversified bet-hedging (don’t put all eggs in one basket) and adaptive coin flipping (choose a strategy at random from ...

A quantum board game is a multi-round protocol between a single quantum player against the quantum board. Molina and Watrous [MW12] discovered quantum hedging. They gave an example for perfect quantum hedging: a board game with winning probability < 1, such that the player can win with certainty at least 1-out-of-2 quantum board games played in parallel. Here we show that perfect quantum hedgin...

Merchants operations involves valuing and hedging the cash flows of commodity and energy conversion assets as real options based on stochastic models that inevitably embed model error. In this paper we quantify how empirically calibrated model errors about the futures price term structure affect the valuation and hedging of commodity storage assets, specifically the storage of natural gas, an i...

We investigate daily robust hedging performance with trading costs for markets of S&P 500 Index option (SPX) and Taiwan Index option (TXO). Robust hedging refers to minimal model dependence on the risky asset price. Two hedging categories including " model-free " and " volatility-model-free, " and nonparametric methods for volatility estimation are considered in our empirical study. In particul...

The current study evaluates how lexical choice impacts task performance in dyads tasked with building an object together without a shared visual environment. Our analyses suggest that, while interpersonal lexical convergence in target linguistic categories promotes successful communication, success does not require convergence in all categories. In the absence of shared visual workspaces and fa...

Bet-hedging theory addresses how individuals should optimize fitness in varying and unpredictable environments by sacrificing mean fitness to decrease variation in fitness. So far, three main bet-hedging strategies have been described: conservative bet-hedging (play it safe), diversified bet-hedging (don't put all eggs in one basket) and adaptive coin flipping (choose a strategy at random from ...

On the condition that both futures and options exist in the markets for hedging, this paper examines the optimal hedging strategy under price risk and background risk. Compared with the previous research, which has studied options hedging against basis risk and production risk being extended to options and futures hedging against price risk and background risk, we proposed a model and have take...