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.

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Year of publication:	2004
Authors:	Sévi, B.
Institutions:	Centre de Recherche en Économie et Droit de l'Énergie, Faculté de sciences économiques
Subject:	MINIMUM VARIANCE HEDGE \| UNCERTAIN DEMAND \| PERFECT FLEXIBILITY \| COST FUNCTION

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Extent:	application/pdf
Series:	Cahiers du CREDEN (CREDEN Working Papers).
Type of publication:	Book / Working Paper
Language:	English
Notes:	14 pages
Classification:	D21 - Firm Behavior ; D81 - Criteria for Decision-Making under Risk and Uncertainty ; G11 - Portfolio Choice
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005739856