This paper considers the multiperiod hedging decision in a framework of mean-reverting spot prices and unbiased futures … markets. The task is to determine the optimal hedging path, i.e., the sequence of positions in futures contracts with the … objective of minimizing the variance of an uncertain future cash flow. The model is used to illustrate both hedging using a …

contracts. -- Spot Market Power ; Derivates Market ; Hedging …

Cross hedging price risk in an incomplete financial market creates basis risk. We propose a new way of modeling basis … necessary and sufficient condition for underhedging in an unbiased market. Using the example of cross hedging jet fuel price … cross hedges differ significantly from those derived under the traditional additive cross hedging model …

We develop a flexible discrete-time hedging methodology that miminizes the expected value of any desired penalty … function of the hedging error within a general regime-switching framework. A numerical algorithm based on backward recursion … allows for the sequential construction of an optimal hedging strategy. Numerical experiments comparing this and other …

We propose a maximum-expected utility hedging model with futures where cash and futures returns follow a bivariate skew … normality, skewness has a material impact when the agent is significantly risk averse. Pure hedging demand is either greater or … pure hedging and minimum-variance demand increases with basis risk, i.e. the imperfect correlation between cash and futures …

We formulate an optimal hedging problem of Bitcoin inverse futures under the minimumvariance framework. We obtain the … optimal hedging strategy in closed forms for both short and long hedges, and compute hedging efficiency under the optimal … strategy. Our empirical studies show that the optimal hedging strategy achieves superior effectiveness in reducing risk and …