Infinite-Horizon Optimal Hedging Under Cone Constraints
We 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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|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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