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DC Field | Value | Language |
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dc.contributor.author | Monoyios, M | - |
dc.date.accessioned | 2009-10-27T13:07:30Z | - |
dc.date.available | 2009-10-27T13:07:30Z | - |
dc.date.issued | 2003 | - |
dc.identifier.citation | Economics and Finance Working papers, Brunel University, 03-13 | en |
dc.identifier.uri | http://bura.brunel.ac.uk/handle/2438/3776 | - |
dc.description | http://www.brunel.ac.uk/about/acad/sssl/ssslresearch/efwps##2003 | en |
dc.description.abstract | The performance of optimal strategies for hedging a claim on a non- traded asset is analyzed. The claim is valued and hedged in a utility max- imization framework, using exponential utility. A traded asset, correlated with that underlying the claim, is used for hedging, with the correlation typically close to 1. Using a distortion method [30, 31] we derive a non- linear expectation representation for the claim's ask price and a formula for the optimal hedging strategy. We generate a perturbation expansion for the price and hedging strategy in powers of 2 = 1 2. The terms in the price expansion are found to be proportional to the central moments of the claim payo under a measure equivalent to the physical measure. The resulting fast computation capability is used to carry out a simulation based test of the optimal hedging program, computing the terminal hedg- ing error over many asset price paths. These errors are compared with those from a naive strategy which us... | en |
dc.language.iso | en_US | en |
dc.publisher | Brunel University | en |
dc.title | Performance of utility-based strategies for hedging basis risk | en |
dc.type | Working Paper | en |
Appears in Collections: | Dept of Economics and Finance Research Papers |
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