File Download
There are no files associated with this item.
Links for fulltext
(May Require Subscription)
- Publisher Website: 10.1007/s10203-012-0137-3
- Scopus: eid_2-s2.0-84908081347
- WOS: WOS:000455419700006
- Find via
Supplementary
- Citations:
- Appears in Collections:
Article: Hedging and the competitive firm under correlated price and background risk
Title | Hedging and the competitive firm under correlated price and background risk |
---|---|
Authors | |
Keywords | Background Risk Expectation Dependence Hedging Production |
Issue Date | 2014 |
Publisher | Springer-Verlag Italia Srl. The Journal's web site is located at http://www.springer.it/libri_libro.asp?id=205 |
Citation | Decisions In Economics And Finance, 2014, v. 37, p. 329-340 How to Cite? |
Abstract | This paper examines the behavior of the competitive firm under correlated price and background risk when a futures market exists for hedging purposes. We show that imposing the background risk, be it additive or multiplicative, on the firm has no effect on the separation theorem. The full-hedging theorem, however, holds if the background risk is independent of the price risk. In the general case of the correlated price and background risk, we adopt the concept of expectation dependence to describe the bivariate dependence structure. When the background risk is additive, the firm finds it optimal to opt for an over-hedge or an under-hedge, depending on whether the price risk is positively or negatively expectation dependent on the background risk, respectively. When the background risk is multiplicative, both the concept of expectation dependence and the Arrow-Pratt measure of relative risk aversion are called for to determine the firm's optimal futures position. © 2012 The Author(s). |
Persistent Identifier | http://hdl.handle.net/10722/177806 |
ISSN | 2023 Impact Factor: 1.4 2023 SCImago Journal Rankings: 0.458 |
ISI Accession Number ID |
DC Field | Value | Language |
---|---|---|
dc.contributor.author | Wong, KP | en_US |
dc.date.accessioned | 2012-12-19T09:39:57Z | - |
dc.date.available | 2012-12-19T09:39:57Z | - |
dc.date.issued | 2014 | en_US |
dc.identifier.citation | Decisions In Economics And Finance, 2014, v. 37, p. 329-340 | en_US |
dc.identifier.issn | 1593-8883 | en_US |
dc.identifier.uri | http://hdl.handle.net/10722/177806 | - |
dc.description.abstract | This paper examines the behavior of the competitive firm under correlated price and background risk when a futures market exists for hedging purposes. We show that imposing the background risk, be it additive or multiplicative, on the firm has no effect on the separation theorem. The full-hedging theorem, however, holds if the background risk is independent of the price risk. In the general case of the correlated price and background risk, we adopt the concept of expectation dependence to describe the bivariate dependence structure. When the background risk is additive, the firm finds it optimal to opt for an over-hedge or an under-hedge, depending on whether the price risk is positively or negatively expectation dependent on the background risk, respectively. When the background risk is multiplicative, both the concept of expectation dependence and the Arrow-Pratt measure of relative risk aversion are called for to determine the firm's optimal futures position. © 2012 The Author(s). | en_US |
dc.language | eng | en_US |
dc.publisher | Springer-Verlag Italia Srl. The Journal's web site is located at http://www.springer.it/libri_libro.asp?id=205 | en_US |
dc.relation.ispartof | Decisions in Economics and Finance | en_US |
dc.rights | The original publication is available at www.springerlink.com | - |
dc.subject | Background Risk | en_US |
dc.subject | Expectation Dependence | en_US |
dc.subject | Hedging | en_US |
dc.subject | Production | en_US |
dc.title | Hedging and the competitive firm under correlated price and background risk | en_US |
dc.type | Article | en_US |
dc.identifier.email | Wong, KP: kpwongc@hkucc.hku.hk | en_US |
dc.identifier.authority | Wong, KP=rp01112 | en_US |
dc.description.nature | link_to_subscribed_fulltext | en_US |
dc.identifier.doi | 10.1007/s10203-012-0137-3 | en_US |
dc.identifier.scopus | eid_2-s2.0-84908081347 | en_US |
dc.identifier.hkuros | 241196 | - |
dc.identifier.spage | 329 | en_US |
dc.identifier.epage | 340 | en_US |
dc.identifier.isi | WOS:000455419700006 | - |
dc.publisher.place | Italy | en_US |
dc.identifier.scopusauthorid | Wong, KP=7404759417 | en_US |
dc.identifier.citeulike | 11465225 | - |
dc.identifier.issnl | 1129-6569 | - |