Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/22718
Authors: 
Schubert, Stefan
Broll, Udo
Year of Publication: 
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

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