Optimum hurricane futures hedge in a warming environment: a risk return jump-diffusion approach
Título: Optimum hurricane futures hedge in a warming environment: a risk return jump-diffusion approach / Carolyn W. Chang, Jack S. K. Chang, Min-Ming Wen
Autor: Chang, Carolyn W.
Notas: Sumario: We develop an optimum riskreturn hurricane hedge model in a doubly stochastic jump-diffusion economy. The model's concave riskreturn trade-off dictates that a higher correlation between hurricane power and insurer's loss, a smaller variable hedging cost, and a larger market risk premium result in a less costly but more effective hedge. The resulting hedge ratio comprises of a positive diffusion, a positive jump, and a negative hedging cost component. Numerical results show that hedging hurricane jump risks is most crucial with jump volatility being the dominant factor, and the faster the warming the more pronounced the jump effects.
Registros relacionados: En: The Journal of risk and insurance. - Nueva York : The American Risk and Insurance Association, 1964- = ISSN 0022-4367. - 03/03/2014 Volumen 81 Número 1 - marzo 2014
Outras classificações: 892.7
Direitos: In Copyright (InC): http://rightsstatements.org/vocab/InC/1.0/