HEDGING AND THE COMPETITIVE FIRM UNDER AMBIGUOUS PRICE AND BACKGROUND RISK

Yusuke Osaki, Kit Pong Wong*, Long Yi

*この研究の対応する著者

研究成果: Article査読

抄録

This paper examines the optimal production and hedging decisions of the competitive firm that possesses smooth ambiguity preferences and faces ambiguous price and background risk. The separation theorem holds in that the firm's optimal output level depends neither on the firm's attitude towards ambiguity nor on the incident to the underlying ambiguity. We derive necessary and sufficient conditions under which the full-hedging theorem holds and thus options are not used. When these conditions are violated, we show that the firm optimally uses options for hedging purposes if ambiguity is introduced to the price and background risk by means of mean-preserving spreads. We as such show that options play a role as a hedging instrument over and above that of futures.

本文言語English
ページ(範囲)E1-E11
ジャーナルBulletin of Economic Research
69
4
DOI
出版ステータスPublished - 2017 10月
外部発表はい

ASJC Scopus subject areas

  • 経済学、計量経済学

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