Infinite-Horizon Optimal Hedging Under Cone Constraints
1999-01
Loading...
View/Download File
Persistent link to this item
Statistics
View StatisticsJournal Title
Journal ISSN
Volume Title
Title
Infinite-Horizon Optimal Hedging Under Cone Constraints
Authors
Published Date
1999-01
Publisher
Center for Economic Research, Department of Economics, University of Minnesota
Type
Working Paper
Abstract
We address the issue of hedging in infinite horizon markets with a type of constraints
that the set of feasible portfolio holdings forms a convex cone. We show
that the minimum cost of hedging a liability stream is equal to its largest present
value with respect to admissible stochastic discount factors, thus can be determined
without finding an optimal hedging strategy. We solve for an optimal hedging
strategy by solving a sequence of independent one-period hedging problems.
We apply the results to a variety of trading restrictions and also show how the
admissible stochastic discount factors can be characterized.
Description
Related to
Replaces
License
Series/Report Number
Funding information
Isbn identifier
Doi identifier
Previously Published Citation
Huang, K.X., (1999), "Infinite-Horizon Optimal Hedging Under Cone Constraints", Discussion Paper No. 304, Center for Economic Research, Department of Economics, University of Minnesota.
Suggested citation
Huang, Kevin Xiaodong. (1999). Infinite-Horizon Optimal Hedging Under Cone Constraints. Retrieved from the University Digital Conservancy, https://hdl.handle.net/11299/55854.
Content distributed via the University Digital Conservancy may be subject to additional license and use restrictions applied by the depositor. By using these files, users agree to the Terms of Use. Materials in the UDC may contain content that is disturbing and/or harmful. For more information, please see our statement on harmful content in digital repositories.