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Title:Hedging the standard of living via cost of living index futures PDF Logo
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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