Science-advisor
REGISTER info/FAQ
Login
username
password
     
forgot password?
register here
 
Research articles
  search articles
  reviews guidelines
  reviews
  articles index
My Pages
my alerts
  my messages
  my reviews
  my favorites
 
 
Stat
Members: 3643
Articles: 2'488'730
Articles rated: 2609

29 March 2024
 
  » arxiv » 1705.6918

 Article overview


Quadratic hedging with multiple assets under illiquidity with applications in energy markets
Panagiotis Christodoulou ; Nils Detering ; Thilo Meyer-Brandis ;
Date 19 May 2017
AbstractWe propose a hedging approach for general contingent claims when liquidity is a concern and trading is subject to transaction cost. Multiple assets with different liquidity levels are available for hedging. Our risk criterion targets a tradeoff between minimizing the risk against fluctuations in the stock price and incurring low liquidity costs. Following c{C}etin U., Jarrow R.A., and Protter P. (2004) we work in an arbitrage-free setting assuming a supply curve for each asset. In discrete time, following the ideas in Schweizer M. (1998) and Lamberton D., Pham H., Schweizer M. (1998) we prove the existence of a locally risk-minimizing strategy under mild conditions on the price process. Under stochastic and time-dependent liquidity risk we give a closed-form solution for an optimal strategy in the case of a linear supply curve model. Finally we show how our hedging method can be applied in energy markets where futures with different maturities are available for trading. The futures closest to their delivery period are usually the most liquid but depending on the contingent claim not necessary optimal in terms of hedging. In a simulation study we investigate this tradeoff and compare the resulting hedge strategies with the classical ones.
Source arXiv, 1705.6918
Services Forum | Review | PDF | Favorites   
 
Visitor rating: did you like this article? no 1   2   3   4   5   yes

No review found.
 Did you like this article?

This article or document is ...
important:
of broad interest:
readable:
new:
correct:
Global appreciation:

  Note: answers to reviews or questions about the article must be posted in the forum section.
Authors are not allowed to review their own article. They can use the forum section.

browser claudebot






ScienXe.org
» my Online CV
» Free


News, job offers and information for researchers and scientists:
home  |  contact  |  terms of use  |  sitemap
Copyright © 2005-2024 - Scimetrica