Michenaud, Sébastien; Solnik, Bruno - In: Journal of International Money and Finance 27 (2008) 5, pp. 677-694
We apply regret theory, an axiomatic behavioral theory, to derive closed-form solutions to optimal currency hedging choices. Investors experience regret of not having chosen the ex post optimal hedging decision. Hence, investors anticipate their future experience of regret and incorporate it in...