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Sonderforschungsbereich 373: Quantification and Simulation of Economic Processes, Humboldt-Universität Berlin >
Discussion Papers, SFB 373, HU Berlin >
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http://hdl.handle.net/10419/62188
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| Title: | | Hedging the standard of living via cost of living index futures  |
| Authors: | | Schulz, Rainer |
| Issue Date: | | 2000 |
| Series/Report no.: | | Discussion Papers, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes 2000,93 |
| Abstract: | | People dislike inflation because inflation erodes the real value of future nominal income and wealth. Adjustment of future nominal values via a cost of living index is an appropriate way to handle the problem of real income risk. Nonetheless an important aspect needs more discussion: If markets existed in which real income risks could be traded-would a rational individual always voluntarily purchase protection against such risk? A model is developed to shed some light on this aspect. It shows that the optimal behaviour depends - as expected - on the cost of protection and the risk preferences of the individual. |
| Subjects: | | Cost of Living Index Futures Markets |
| JEL: | | D11 D8 |
| Persistent Identifier of the first edition: | | urn:nbn:de:kobv:11-10048193 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Discussion Papers, SFB 373, HU Berlin
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