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Hedging, Pareto Optimality, and Good Deals

Author

Listed:
  • Hirbod Assa

    (Concordia University)

  • Keivan Mallahi Karai

    (Jacobs University)

Abstract

In this paper, we will describe a framework that allows us to connect the problem of hedging a portfolio in finance to the existence of Pareto optimal allocations in economics. We will show that the solvability of both problems is equivalent to the No Good Deals assumption. We will then analyze the case of co-monotone additive monetary utility functions and risk measures.

Suggested Citation

  • Hirbod Assa & Keivan Mallahi Karai, 2013. "Hedging, Pareto Optimality, and Good Deals," Journal of Optimization Theory and Applications, Springer, vol. 157(3), pages 900-917, June.
    • Handle: RePEc:spr:joptap:v:157:y:2013:i:3:d:10.1007_s10957-012-0209-0
    DOI: 10.1007/s10957-012-0209-0
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Pascal Franc{c}ois & Genevi`eve Gauthier & Fr'ed'eric Godin & Carlos Octavio P'erez Mendoza, 2024. "Is the difference between deep hedging and delta hedging a statistical arbitrage?," Papers 2407.14736, arXiv.org, revised Oct 2024.
    2. Marcelo Righi, 2024. "Optimal hedging with variational preferences under convex risk measures," Papers 2407.03431, arXiv.org, revised Oct 2024.
    3. Hirbod Assa, 2015. "Trade-off Between Robust Risk Measurement and Market Principles," Journal of Optimization Theory and Applications, Springer, vol. 166(1), pages 306-320, July.
    4. repec:cte:idrepe:24017 is not listed on IDEAS
    5. Balbás, Beatriz & Balbás, Raquel, 2016. "VaR as the CVaR sensitivity : applications in risk optimization," IC3JM - Estudios = Working Papers id-16-01, Instituto Mixto Carlos III - Juan March de Ciencias Sociales (IC3JM).
    6. repec:cte:idrepe:id-16-01 is not listed on IDEAS
    7. Balbás, Beatriz & Balbás, Raquel, 2017. "Differential equations connecting VaR and CVaR," IC3JM - Estudios = Working Papers 24017, Instituto Mixto Carlos III - Juan March de Ciencias Sociales (IC3JM).

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