Risk aversion is a key element of utility maximizing hedge strategies; however, it has typically been assigned an … of risk aversion that is based on the observed risk preferences of energy hedging market participants. The resulting … ratio in a utility based comparison …

hedging is not suf?cient to guarantee Ellsberg-like behavior if the agent violates expected utility for objective lotteries … novel notion of preference for hedging that applies to both objective lotteries and uncertain acts. We show that this axiom …, as in the rank dependent utility model, but using the worst from a set of distortions. We show that a preference for …

explains part of relative risk aversion, and the short term interest rate has some explanatory power for hedging components … Risk Aversion ; Hedging Components ; Return Predictability ; the Value Premium ; Nonlinear State-Space Model with GARCH …