## Abstract This paper analyzes the hedging decisions for firms facing price and basis risk. Two conditions assumed in most models on optimal hedging are relaxed. Hence, (i) the spot price is not necessarily linear in both the settlement price and the basis risk and (ii) futures contracts and optio
Optimum futures hedges with jump risk and stochastic basis
β Scribed by Chang, Carolyn W.; Chang, Jack S.K.; Fang, Hsing
- Book ID
- 102647609
- Publisher
- John Wiley and Sons
- Year
- 1996
- Tongue
- English
- Weight
- 873 KB
- Volume
- 16
- Category
- Article
- ISSN
- 0270-7314
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π SIMILAR VOLUMES
## Abstract In a doubly stochastic jumpβdiffusion economy with stochastic jump arrival intensity and proportional transaction costs, we develop a fiveβfactor riskβreturn asset pricing inequality to model optimum futures hedge in the presence of clustered supply and demand shocks, stochastic basis,
ost empirical work and empirically oriented illustrations dealing with M the hedging effectiveness of futures contracts utilize either one of two approaches, namely: Risk minimization or payoff maximization. In the first approach, hedging is perceived as a combination of a futures position with an e