theory. The paper shows that Croatian firm's employ debt in their capital structure close to the debt equity ratio 1:1, with …

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 …

Local and global quadratic hedging are alternatives to delta hedging that more appropriately address the hedging …) the value added of global over local quadratic hedging, (ii) the importance of the choice of measure (real-world or risk …-neutral) when implementing quadratic hedging, and (iii) the robustness of quadratic hedging to model mis-specification. We find that …

Recent research has shown that global quadratic hedging, also known as variance-optimal hedging and mean …-variance hedging, can significantly reduce the risk of hedging call and put options with long-term maturities (one year or more), such … as Long-Term Equity AnticiPation Securities (LEAPS). We propose a modification to global quadratic hedging that is more …

Insurers issuing segregated fund policies apply dynamic hedging to mitigate risks related to guarantees embedded in … the imperfect correlation between the underlying fund and its corresponding hedging instruments. The current note …

This paper proposes an efficient way to implement quadratic hedging schemes for European options when the asset return … compare their performance by computing the corresponding one-period and terminal hedging errors. Our results suggest that the … LRM scheme under the physical measure consistently outperforms competing hedging strategies …

capital cost can be reduced by hedging longevity risk with longevity swaps, a form of reinsurance. We assess the costs of … reasonable market price of longevity risk, the market cost of hedging longevity risk for earlier ages is lower than the cost of … capital required under Solvency II. Longevity swaps covering higher ages, around 90 and above, have higher market hedging …

capital cost can be reduced by hedging longevity risk with longevity swaps, a form of reinsurance. We assess the costs of … reasonable market price of longevity risk, the market cost of hedging longevity risk for earlier ages is lower than the cost of … capital required under Solvency II. Longevity swaps covering higher ages, around 90 and above, have higher market hedging …