An optimal Strategy for Hedging with Short-Term Futures Contracts |
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Authors: | G Larcher G Leobacher |
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Institution: | 1.Institut für Analysis, Universität Linz, Austria |
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Abstract: | The search for an optimal strategy to reduce the running risk in hedging a long-term supply commitment with short-dated futures contracts leads to a class of intrinsic optimization problems. We give an explicit analytic solution for this optimization problem if the market price of the commodity is based on a simple Gaussian model, thereby replacing previously used incomplete approximations to the optimal strategy. |
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Keywords: | hedging with futures contracts exact optimization optimal hedging strategy |
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