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Hedging, Pareto Optimality, and Good Deals

Author

Listed:
  • Hirbod Assa

    (Concordia University)

  • Keivan Mallahi Karai

    (Jacobs University)

Abstract

In this paper, we will describe a framework that allows us to connect the problem of hedging a portfolio in finance to the existence of Pareto optimal allocations in economics. We will show that the solvability of both problems is equivalent to the No Good Deals assumption. We will then analyze the case of co-monotone additive monetary utility functions and risk measures.

Suggested Citation

  • Hirbod Assa & Keivan Mallahi Karai, 2013. "Hedging, Pareto Optimality, and Good Deals," Journal of Optimization Theory and Applications, Springer, vol. 157(3), pages 900-917, June.
    • Handle: RePEc:spr:joptap:v:157:y:2013:i:3:d:10.1007_s10957-012-0209-0
    DOI: 10.1007/s10957-012-0209-0
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    References listed on IDEAS

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    Cited by:

    1. Hirbod Assa, 2015. "Trade-off Between Robust Risk Measurement and Market Principles," Journal of Optimization Theory and Applications, Springer, vol. 166(1), pages 306-320, July.
    2. Balbás, Alejandro & Balbás, Beatriz & Balbás, Raquel, 2017. "Differential equations connecting VaR and CVaR," INDEM - Working Paper Business Economic Series 24017, Instituto para el Desarrollo Empresarial (INDEM).
    3. Balbás, Alejandro & Balbás, Beatriz & Balbás, Raquel, 2016. "VaR as the CVaR sensitivity : applications in risk optimization," INDEM - Working Paper Business Economic Series id-16-01, Instituto para el Desarrollo Empresarial (INDEM).

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