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Dynamic Optimal Hedge Ratio Design when Price and Production are stochastic with Jump

Abstract : In this paper, we focus on the farmer's risk income, by using commodity futures, when price and output processes are correlated random represented by jump-diffusion models. We evaluate the expected utility of the farmer's wealth and we determine, at each instant of time, the optimal consumption rate and hedge position at given the time to harvest and state variables. We find a closed form optimal position of consumption and position rate in case of CARA utility investor. This result (see table 1.5) is a generalization of Ho (1984) result who consider the particular case where price and output are diffusion models.
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https://hal.umontpellier.fr/hal-02417401
Contributor : Anthony Herrada <>
Submitted on : Wednesday, December 18, 2019 - 10:55:42 AM
Last modification on : Friday, December 20, 2019 - 1:46:28 AM
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  • HAL Id : hal-02417401, version 1

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Nyassoke Titi Gaston Clément, Jules Sadefo Kamdem, Louis Aimé Fono. Dynamic Optimal Hedge Ratio Design when Price and Production are stochastic with Jump. 2019. ⟨hal-02417401⟩

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