The traditional hedging model revisited with a non-observable convenience yield

Abstract : This article examines the hedging of constrained commodity positions with futures contracts. We extend the study of Adler and Detemple (1988 a,b) to include a partial information framework where the convenience yield is not observable. As a consequence, futures prices depend on investor's beliefs regarding the value of the convenience yield, and every component of the hedge is impacted by thee beliefs. We achieve a decomposition of the demand that clarifies the impact on the optimal hedge of the beliefs, the spot price and the risk-free rate. This decomposition is crucial to understand our example that examines the case of the copper market.
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Financial Review, Wiley, 2011, Vol. 46 (Issue 4), pp. 569-593. 〈10.1111/j.1540-6288.2011.00312.x〉
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Soumis le : jeudi 12 janvier 2012 - 13:24:02
Dernière modification le : lundi 18 mai 2015 - 12:55:09

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Constantin Mellios, Pierre Six. The traditional hedging model revisited with a non-observable convenience yield. Financial Review, Wiley, 2011, Vol. 46 (Issue 4), pp. 569-593. 〈10.1111/j.1540-6288.2011.00312.x〉. 〈hal-00659232〉

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