IDEAS home Printed from https://ideas.repec.org/a/wsi/ijfexx/v12y2025i01ns2424786324500105.html
   My bibliography  Save this article

Dynamic optimal hedging with futures in portfolio context

Author

Listed:
  • Moustapha Pemy

    (Department of Mathematics, Towson University, Towson, MD 21252-0001, USA)

  • Jules Sadefo Kamdem

    (MRE UR 209 et Faculte d’économie, Université de Montpellier, France)

Abstract

In this paper, we investigate the optimal hedging strategy in a continuous time framework that is more adequate for commodities. We consider the consumption-investment problem where all asset prices follow mean-reverting jump-diffusion processes. The optimal investment and consumption strategies are derived in closed form. The framework is used to address one of the major risk factors faced by commodity producers. We show that a commodity producer will be better off hedging his/her futures contracts by simultaneously investing in foreign exchange products to minimize the adverse impacts of the jump risk prevalent in commodity prices.

Suggested Citation

  • Moustapha Pemy & Jules Sadefo Kamdem, 2025. "Dynamic optimal hedging with futures in portfolio context," International Journal of Financial Engineering (IJFE), World Scientific Publishing Co. Pte. Ltd., vol. 12(01), pages 1-18, March.
    • Handle: RePEc:wsi:ijfexx:v:12:y:2025:i:01:n:s2424786324500105
    DOI: 10.1142/S2424786324500105
    as

    Download full text from publisher

    File URL: http://www.worldscientific.com/doi/abs/10.1142/S2424786324500105
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1142/S2424786324500105?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wsi:ijfexx:v:12:y:2025:i:01:n:s2424786324500105. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Tai Tone Lim (email available below). General contact details of provider: http://www.worldscientific.com/worldscinet/ijfe .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.