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Conference Paper: Risk management for a risk-averse firm with contingent payment
Title | Risk management for a risk-averse firm with contingent payment |
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Authors | |
Keywords | Commodity Financial hedging Risk aversion Volatile raw material price |
Issue Date | 2014 |
Publisher | Newswood Ltd.. |
Citation | The 2014 World Congress on Engineering and Computer Science (WCECS 2014), San Francisco, CA., 22-24 October 2014. In Proceedings of the World Congress on Engineering and Computer Science, 2014, v. 2, p. 1070-1074 How to Cite? |
Abstract | This paper studies the contingent sales price risk mitigation problem of a risk-averse firm which procures some kind of commodity from the spot market as raw material for making certain product. The payment received by this firm depends on the underlying commodity spot price which is unknown until the product is physically delivered. In order to reduce the volatility stemming from the contingent payment, a financial hedging strategy requiring commodity futures contracts is proposed. This approach allows the firm to rebalance the commodity futures position dynamically. This study shows that the optimal strategy can be obtained when the firm adopts the exponential or mean-variance utility. |
Description | Series title: Lecture Notes in Engineering and Computer Science |
Persistent Identifier | http://hdl.handle.net/10722/206646 |
ISBN | |
ISSN | 2020 SCImago Journal Rankings: 0.117 |
DC Field | Value | Language |
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dc.contributor.author | Li, Q | - |
dc.contributor.author | Chu, LK | - |
dc.date.accessioned | 2014-11-24T01:27:25Z | - |
dc.date.available | 2014-11-24T01:27:25Z | - |
dc.date.issued | 2014 | - |
dc.identifier.citation | The 2014 World Congress on Engineering and Computer Science (WCECS 2014), San Francisco, CA., 22-24 October 2014. In Proceedings of the World Congress on Engineering and Computer Science, 2014, v. 2, p. 1070-1074 | - |
dc.identifier.isbn | 978-988-19253-7-4 | - |
dc.identifier.issn | 2078-0958 | - |
dc.identifier.uri | http://hdl.handle.net/10722/206646 | - |
dc.description | Series title: Lecture Notes in Engineering and Computer Science | - |
dc.description.abstract | This paper studies the contingent sales price risk mitigation problem of a risk-averse firm which procures some kind of commodity from the spot market as raw material for making certain product. The payment received by this firm depends on the underlying commodity spot price which is unknown until the product is physically delivered. In order to reduce the volatility stemming from the contingent payment, a financial hedging strategy requiring commodity futures contracts is proposed. This approach allows the firm to rebalance the commodity futures position dynamically. This study shows that the optimal strategy can be obtained when the firm adopts the exponential or mean-variance utility. | - |
dc.language | eng | - |
dc.publisher | Newswood Ltd.. | - |
dc.relation.ispartof | Proceedings of the World Congress on Engineering and Computer Science (WCECS 2014) | - |
dc.subject | Commodity | - |
dc.subject | Financial hedging | - |
dc.subject | Risk aversion | - |
dc.subject | Volatile raw material price | - |
dc.title | Risk management for a risk-averse firm with contingent payment | en_US |
dc.type | Conference_Paper | en_US |
dc.identifier.email | Chu, LK: lkchu@hkucc.hku.hk | - |
dc.identifier.hkuros | 241547 | - |
dc.identifier.volume | 2 | - |
dc.identifier.spage | 1070 | - |
dc.identifier.epage | 1074 | - |
dc.publisher.place | Hong Kong | - |
dc.customcontrol.immutable | sml 141124 | - |
dc.identifier.issnl | 2078-0958 | - |