Traditional dynamic hedging strategies are based on local information (ie Delta and Gamma) of the financial instruments to be hedged. We propose a new dynamic hedging strategy that employs non-local information and compare the profit and loss (P&L) resulting from hedging vanilla options when the...

In this paper we present a mean-reverting jump diffusion model for the electricity spot price. We obtain a closed-form solution for forward contracts and calibrate it to market data from England and Wales. Finally, based on the calibrated forward curve we present months, quarters, and...

An omitted variable in the household's preferences specification may lead to overestimate the volatility of consumption, or alternatively to overvalue the risk aversion coefficient required to match the equity premium. This paper proposes to augment the utility function by adding a nontradable...

This paper considers structural nonparametric random utility models for continuous choice variables. It provides sufficient conditions on the structural model to yield reduced-form systems of nonparametric stochastic demand functions that constitute a global homeomorphism between demands and...

This paper considers parametric estimation problems with i.i.d. data. It focusses on rate-efficiency, in the sense of maximal possible convergence rates of stochastically bounded estimators, as an optimality criterion, largely unexplored in parametric estimation. Under mild conditions, the...

The literature on unemployment dynamics is mainly concerned with the nature and impact of shocks to unemployment. In this paper we use OECD unemployment data to infer the nature of these shocks using factor analysis. We find that two Principal Components can account for a large part of the...