Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/141903
Authors: 
Schubert, Stefan Franz
Broll, Udo
Year of Publication: 
2015
Citation: 
[Journal:] Contemporary Economics [ISSN:] 2084-0845 [Publisher:] Vizja Press & IT [Place:] Warsaw [Volume:] 9 [Year:] 2015 [Issue:] 2 [Pages:] 171-179
Abstract: 
Our study examines the behavior of a risk-averse investor who faces two sources of uncertainty: a random asset price and inflation risk. Both sources of uncertainty make it difficult to stabilize consumption over time. However, investors can enter risk-sharing markets, such as futures markets, to manage these risks. We develop a dynamic risk management model. Optimal consumption and risk management strategies are derived. It is shown that dynamic hedging increases an investor's welfare in terms of the expected inter-temporal utility of consumption.
Subjects: 
Dynamic hedging
asset price risk
inflation risk
real wealth
consumption
JEL: 
D21
D24
Persistent Identifier of the first edition: 
Document Type: 
Article
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