In this paper, we focus on the farmer’s risk income when using commodity futures, price and output processes are randomly correlated represented by jump-diffusion models. We evaluate expected utility of wealth determine optimal consumption rate hedging position at each point in time given harvest timing state variables. find a closed form for positioning case an investor with CARA utility. This...

We consider rewriting systems for unranked ordered terms, i.e. trees where the number of successors of a node is not determined by its label, and is not a priori bounded. The rewriting systems are defined such that variables in the rewrite rules can be substituted by hedges (sequences of terms) instead of just terms. Consequently, this notion of rewriting subsumes both standard term rewriting a...

Over the last half decade, asset flows into hedge funds have surged, the number of funds has expanded exponentially, and new products have emerged which allow investors to obtain hedge fund exposure via structured transactions. To many, this is due to a paradigm shift in investment management and constitutes a modern financial revolution. However, to others, hedge funds are simply investment st...

We examine Schweizer's (1991) locally risk-minimizing (LRM) hedge approach for hedging a European call in the case when the stock price follows a Poisson jump di usion process with lognormally distributed jump sizes. In contrast to Merton's (1976) hedging strategy where di usion risk is perfectly hedged while jump risk remains un-hedged, the locally risk-minimizing strategy hedges both di usion...

H funds’ extensive use of derivatives, short selling, and leverage and their dynamic trading strategies create significant nonnormalities in their return distributions. Hence, the traditional performance measures fail to provide an accurate characterization of the relative strength of hedge fund portfolios. This paper uses the utility-based nonparametric and parametric performance measures to d...

This paper analyzes optimal investment decisions, in the presence of non-redundant hedge funds, for investors with constant relative risk aversion. Factor regression models with optionlike risk factors and no-arbitrage principles are used to identify and estimate the market price of hedge fund risk, the volatility coefficients of hedge fund returns and the correlation between hedge fund and mar...

We present an explicit formula for European options on coupon bearing bonds and swaptions in the Heath-Jarrow-Morton (HJM) one factor model with non-stochastic volatility. The formula extends the Jamshidian formula for zero-coupon bonds. We provide also an explicit way to compute the hedging ratio (∆) to hedge the option with its underlying.