We use Malliavin calculus and the Clark-Ocone formula to derive the hedging strategy of an arithmetic Asian Call option in general terms. Furthermore we derive an expression for the density of the integral over time of a geometric Brownian motion, which allows us to express hedging strategy and...

Empirical studies dealing with price uncertainty are abundant; for example, Arshanapalli and Gupta (1996) derived estimating equations by applying uncertainty analogues of Hotelling's lemma and Roy's identity to the indirect expected utility function (see Pope, 1980, and, Dalal 1990). However,...

Paroush and Wolf (1989) modeled output hedging in the presence of basis risk. They showed that (in the absence of scale shift) the optimal hedging and output fall in response to basis risk. However, they used a second-order Taylor's approximation of the utility function. Also, they did not show...

Paroush and Wolf (1992) investigated a perfectly competitive firm which faces input price uncertainty in one input of its two-input production function. The main purpose of their study was to determine the impact of the technological relationship on the derived demand when the input is hedged in...