We develop a partial equilibrium model of the term structure of storable commodity futures and options on futures, where the stochastic movements of the convenience yield as well as those of interest rates and risk premia of primitives assets are considered. However, contrary to the existing...

This paper extends the monetary equilibrium approach of Lioui and Poncet (2004) to a jump-diffusion setting. We show that in the presence of jumps money non-neutrality is preserved and the jump component of the inflation risk premium is affected, in addition to technology factors, by monetary...

This paper casts the opportunity set hedging demand in terms of the certainty equivalent of wealth for an investor who considers both consumption and bequest motives and is constrained to invest his asset proportions of wealth in a convex set. We show that the hedge portfolio exactly balances...

This article investigates the hedging performance of the Libor Market Model (LMM) as well as the need to use models that explicitly incorporate Volatility Specific Factors (VSF) to better the hedging results. We compare the hedging performance of a standard LMM to that of a Constant Elasticity...

This article analyzes the state variables Merton-Breeden hedging demand for an investor endowed with a utility function over both intermediate consumption and terminal wealth. Based on the three-factor model of Babbs and Nowman (1999), we show that this demand can be simply expressed as weighted...

Key structures for insurance risk transfer to capital markets are insurance-linked securities issued by industrial corporations and insurance-reinsurance companies. This paper develops an arbitrage approach to valuing these structured products for non-catastrophic events in a framework of...