We examine the relationship between derivatives hedging, risk-taking, and managerial compensation incentives from an enterprise risk management perspective in U.S. publicly traded property-liability insurance companies. We find that derivatives usage is negatively related to various risks, supporting the stabilizing effect of derivatives use for hedging purposes. Our evidence also shows that de...

Derivatives are innovative financial instruments in the 21st century to help market participants mitigating risk. Commodity derivatives not new world, but reentered with face into fray. In India, introduced at first on index and followed by securities commodities phase wise for betterment of markets price discovery. The present study explores association trend between Spot Futures Market India ...

We consider the problem of hedging the loss of a given portfolio of derivatives using a set of more liquid derivative instruments. We illustrate why the typical mathematical formulation for this hedging problem is ill-posed. We propose to determine a hedging portfolio by minimizing a proportional cost subject to an upper bound on the hedge risk; this bound is typically slightly larger than the ...

For many individuals and organizations, cyber-insurance is the most practical and only way of handling a major financial impact of an information security event. However, the cyber-insurance market suffers from the problem of information asymmetry, lack of product diversity, illiquidity, high transaction cost, and so on. On the other hand, in theory, capital market-based financial instruments c...

In this paper, we consider the hedging of portfolio loss derivatives using single-name credit default swaps as hedging instruments. The hedging issue is investigated in a general pure jump dynamic setting where default times are assumed to admit a joint density. In a first step, we compute default intensities adapted to the global filtration of defaults. In particular, we stress the impact of a...

The author analyzes the pricing and hedging problem for Equity Indexed Annuities (EIAs) with underlying risky assets following a geometric Variance-Gamma process. This model allows accurate and parsimonious replication of the implied volatility smiles observed in the financial market. I argue that this model produces consistency in pricing and hedging between the financial and insurance markets...