This paper uses a dynamic optimization model to estimate the welfare gains of hedging against commodity price risk for … commodity-exporting countries. We show that the introduction of hedging instruments such as futures and options enhances … domestic welfare through two channels. First, by reducing export income volatility and allowing for a smoother consumption path …

This paper reviews the cross-country record of economic growth, using as organizing framework how economic theory has …

as well as exogenous fundamentals, induces a level of implied volatility in excess of actual volatility (volatility wedge … progressively resolved. Empirically, we indeed find a positive volatility wedge that declines over time, only for those currencies …

Despite much work on hedging in incomplete markets, the literature still lacks tractable dynamic hedges in plausible … deviate unless she can pre-commit to follow them. We apply our results to the discrete hedging problem of derivatives when … specialized to the Black-Scholes setting. We also generalize our results to richer settings to study dynamic hedging with Poisson …

futures contracts. Their hedging demand is met by financial intermediaries who act as speculators, but are constrained in risk …-taking. Increases (decreases) in producers’ hedging demand (the risk-bearing capacity of speculators) increase the costs of hedging … 1980-2006, we show that producers’ hedging demand - proxied by their default risk - forecasts spot prices, futures prices …

stochastic. It then uses the results to explain the dynamics of hedging. Bankruptcy rules are important determinants of corporate … produce the same prices, they can have very different hedging implications. We show that empirical results on the relation …

forward hedging and vertical integration are two separate mechanisms for demand and spot price risk diversification that both … forward hedging when retailers are highly risk averse. We illustrate our analysis with data from the French electricity market. …

Cross-country evidence is presented on resource dependence and the link between volatility and growth. First, growth … depends negatively on volatility of unanticipated output growth independent of initial income per capita, the average … growth. Second, the adverse effect of resources on growth operates primarily through higher volatility. The positive effect …