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Hedging demand and the certainty equivalent of wealth

Author

Listed:
  • Sami Attaoui

    (Neoma Business School)

  • Pierre Six

    (Neoma Business School)

Abstract

This paper casts the opportunity set hedging demand in terms of the certainty equivalent of wealth for an investor who considers both consumption and bequest motives and is constrained to invest his asset proportions of wealth in a convex set. We show that the hedge portfolio exactly balances out the unfavorable impact of the opportunity set on the certainty equivalent of wealth.

Suggested Citation

  • Sami Attaoui & Pierre Six, 2014. "Hedging demand and the certainty equivalent of wealth," Economics Bulletin, AccessEcon, vol. 34(3), pages 1742-1750.
    • Handle: RePEc:ebl:ecbull:eb-13-00414
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2014/Volume34/EB-14-V34-I3-P160.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Hedging Demand; Dynamic Opportunity Set; Wealth Certainty Equivalent; Risk Aversion.;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets

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