This paper studies the hedging of price risk when payment dates are uncertain, a problem that frequently occurs in practice. It derives and establishes the variance minimizing dynamic hedging strategy, using forward contracts with different times to maturity. The resulting strategy fully hedges...

This note studies a firm's optimal hedging strategy with tailor-made exotic derivatives under both price risk and quantity risk. It extends the analysis of Brown and Toft (2002) by relaxing the distributional assumptions. The optimal pay-off function of a derivative contract is characterized in...

This paper studies the impact of counter-party default risk of forward contracts on a firm's production and hedging decisions. Using a model of a risk-averse competitive firm under price uncertainty, it derives several fundamental results. If expected profits from forward contracts are zero, the...

This paper studies the problem of hedging price risk when payment dates are uncertain. It derives the variance minimizing dynamic hedging strategy, using forward contracts with different times to maturity. The resulting strategy fully hedges the expected price exposure for each possible payment...

This paper studies the impact of counter-party default risk of forward contracts on a firm's production and hedging decisions. Within a model of a risk-averse competitive firm under price uncertainty, it derives several fundamental results. If expected profits from forward contracts are zero,...

This paper presents a reduced form affine two-factor model to price commodity derivatives, which generalizes the model by Schwartz amp; Smith (2000). The model allows for two mean-reverting stochastic factors, and therefore implies that spot and futures prices can be stationary. An empirical...

In this paper we investigate empirically the relative advantages of floor and screen trading systems. We judge the systems by their ability in providing a high degree of market integration. The main result is that a closer integration of underlying and derivative markets occurs when both...

Providing a framework to integrate regret as an additional decision criterion in Markowitz's model of portfolio selection, we propose two different views on regret: An investor might feel regret with respect to the ex-post best alternative either in terms of return or in terms of preference...

This paper analyzes trading strategies designed to exploit the low-beta anomaly. Although the notion of buying low-beta stocks and selling high-beta stocks is natural, a choice is necessary with respect to the relative weighting of high-beta stocks and low-beta stocks in the portfolio. Our...

Option-implied moments, like implied volatility, contain useful information about an underlying asset's return distribution but are derived under the risk-neutral probability measure. This paper provides a direct way of converting risk-neutral moments into the corresponding physical moments,...