German so is a demonstrative expression which picks up degrees or properties and combines as a modifier with gradable as well as non-gradable expressions. Like other demonstratives it can be used deictically and anaphorically, and in addition occur 'out of the blue', without a demonstration gesture or antecedent. If an 'out of the blue' use of so is combined with a gradable expression it yields...

Within a Markovian complete financial market, we consider the problem of hedging a Bermudan option with a given probability. Using stochastic target and duality arguments, we derive a backward algorithm for the Fenchel transform of the pricing function. This algorithm is similar to the usual American backward induction, except that it requires two additional Fenchel transformations at each exer...

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This paper analyzes optimal hedging of a tradable risk (e.g. price risk or exchange rate risk) with forward contracts in the presence of untradable in ation risk. Utility is de ned over real wealth. Optimal forward positions are derived relative to a given initial exposure in the tradable risk. A nominally unbiased forward market usually implies a non-zero real risk premium and hence some risk ...

Managers can improve real risk-adjusted firm performance by matching nominal assets with nominal liabilities, thereby reducing the sensitivity of real risk-adjusted returns to unexpected inflation. We model these returns as a function of nominal and real assets and liabilities and illustrate our proposition using a simulation. We test the empirical implications of our model in a sample of liste...

This paper develops a bivariate Markov Switching FIGARCH (MS-FIGARCH) process with constant and time varying transition probabilities as a way of modeling spot futures dynamics. An application of the model illustrates that the S&P500 and its futures exhibit long memory in volatility and structural breaks that are driven by changes in the cost of carry. The model with constant transition probabi...

This paper proposes a novel analytical pricing–hedging framework for volatility derivatives which simultaneously takes into account rough and jumps. Directly targeting the instantaneous variance of risky asset, our model consists generalized fractional Ornstein–Uhlenbeck process driven by Lévy subordinator an independent sinusoidal-composite process, allows characteristic function average forwa...

In this paper we study Make-To-Stock manufacturing systems and seek on-line algorithms for determining optimal or near optimal buffer capacities (hedging points) that balance inventory against stockout costs. Using a Stochastic Fluid Model (SFM), we derive sample derivatives (sensitivities) which, under very weak structural assumptions on the defining demand and service processes, are shown to ...

This paper proposes a swarm intelligence long-term hedging tool to support electricity producers in competitive electricity markets. This tool investigates the long-term hedging opportunities available to electric power producers through the use of contracts with physical (spot and forward) and financial (options) settlement. To find the optimal portfolio the producer risk preference is stated ...

We consider a problem of Duffie and Richardson in an economy in which there are two observable processes X and Y both driven by Brownian motions. One of processes is the price process of the asset which can be used for hedging the contingent claim. The objective is to find a trading strategy which minimizes the deviation (in p-norm or other loss function) of the portfolio value from the stochas...