On the exact minimum variance hedge of an un- certain quantity with flexibility
The purpose of this paper is to investigate the impact of production cost variability upon hedging decision when the firm is a risk minimizer agent facing both price and quantity uncertainties. We show, under a perfect flexibility assumption, that considering cost variability leads to a lower [higher] optimal hedge ratio assuming a positive [negative] relation between prices and quantities.
|Date of creation:||2004|
|Date of revision:|
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