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Technische Universität Dresden >
Fakultät Wirtschaftswissenschaften, Technische Universität Dresden >
Dresden Discussion Paper Series in Economics, Faculty of Business and Economics, TU Dresden >
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http://hdl.handle.net/10419/22718
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| Title: | | Dynamic Hedging of Real Wealth Risk  |
| Authors: | | Schubert, Stefan Broll, Udo |
| Issue Date: | | 2005 |
| Series/Report no.: | | Dresden discussion paper in economics 01/05 |
| Abstract: | | International and national investors are often exposed to real wealth risks, stemming from volatile asset prices and inflation uncertainty, making it difficult to stabilize consumption patterns. However, investors can enter futures markets to hedge against these risks. The paper develops a simple continuous-time dynamic model, where the evolution of asset price, price level and futures price and hence real wealth is stochastic. For a risk averse investor, optimal consumption and hedging strategy are derived and discussed. It is shown that hedging increases the investor's wellbeing in terms of intertemporal utility of consumption. |
| Subjects: | | wealth asset price dynamic hedging optimum consumption |
| JEL: | | F31 F21 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Dresden Discussion Paper Series in Economics, Faculty of Business and Economics, TU Dresden
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