Consumption, inflation risk and dynamic hedging

Artikel

Our study examines the behavior of a risk-averse investor who faces two sources of uncertainty: a random asset price and inflation risk. Both sources of uncertainty make it difficult to stabilize consumption over time. However, investors can enter risk-sharing markets, such as futures markets, to manage these risks. We develop a dynamic risk management model. Optimal consumption and risk management strategies are derived. It is shown that dynamic hedging increases an investor's welfare in terms of the expected inter-temporal utility of consumption.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Journal: Contemporary Economics ; ISSN: 2084-0845 ; Volume: 9 ; Year: 2015 ; Issue: 2 ; Pages: 171-179 ; Warsaw: Vizja Press & IT

Classification and Topics

• Classification: Wirtschaft ; Firm Behavior: Theory ; Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
• Subject: Dynamic hedging ; asset price risk ; inflation risk ; real wealth ; consumption

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Schubert, Stefan Franz ; Broll, Udo
• Event: Veröffentlichung
• (who): Vizja Press & IT
• (where): Warsaw
• (when): 2015

Further information

• DOI: doi:10.5709/ce.1897-9254.165
• Handle: http://hdl.handle.net/10419/141903
• Last update: 10.03.2025, 11:41 AM CET