Purpose – The purpose of this paper is to empirically test dynamic hedging, using data from the FTSE-100 and Standard & Poor’s (S&P) 500 futures indices. Design/methodology/approach – The authors introduce a dynamic continuous-time hedging model in futures markets. The authors further...

In this paper, we examine the interaction among the investment, production and hedging decisions. In so doing, we provide simple formulas that enable the firm, at any point in time, to quantify the impact of one decision on another and thus modify its strategy accordingly.