Novales, Alfonso; Lafuente, J.A. - Facultad de Ciencias Económicas y Empresariales, … - 2002
We provide an analytical discussion of the optimal hedge ratio under discrepancies between the futures market price and its theoretical valuation according to the cost-of-carry model. Assuming a geometric Brownian motion for spot prices, we model mispricing as a speci…c noise component in the...