Infinite-Horizon Optimal Hedging Under Cone Constraints
AbstractWe address the issue of hedging in infinite horizon markets with a type of constraints that the set of feasible portfolio holdings forms a convex cone. We show that the minimum cost of hedging a liability stream is equal to its largest present value with respect to admissible stochastic discount factors, thus can be determined without finding an optimal hedging strategy
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Bibliographic InfoPaper provided by Minnesota - Center for Economic Research in its series Papers with number 304.
Length: 22 pages
Date of creation: 1999
Date of revision:
Contact details of provider:
Postal: UNIVERSITY OF MINNESOTA, CENTER FOR ECONOMIC RESEARCH, DEPARTMENT OF ECONOMICS, MINNEAPOLIS MINNESOTA 35455 U.S.A.
Web page: http://www.econ.umn.edu/
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FINANCIAL MARKET ; HEDGING;
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- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
- G20 - Financial Economics - - Financial Institutions and Services - - - General
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