In this paper we assess the partial hedging problems by formulating hedging strategies that minimize conditional value-at-risk (CVaR) of the portfolio loss under stochastic interest rate environment. The combination of stochastic interest and CVaR hedging method makes the valuing approach more complex than the existing model with constant interest rate. We take up two issues in searching the op...

While most research on hedging has focused on foreign currency exposures, analysis of jet fuel price exposure in the airline industry and the effects of both financial and operational hedging on this exposure provides valuable insights into risk management. Exposure and hedging in the airline industry is relatively straightforward compared to foreign exchange hedging by multinationals. We inves...

W consider a firm that invests in capacity under demand uncertainty and thus faces two related but distinct types of risk: mismatch between capacity and demand and profit variability. Whereas mismatch risk can be mitigated with greater operational flexibility, profit variability can be reduced through financial hedging. We show that the relationship between these two risk mitigating strategies ...

In the Black-Cox model, a firm makes default when its value hits an exponential barrier. Here, we propose an hybrid model that generalizes this framework. The default intensity can take two different values and switches when the firm value crosses the barrier. Of course, the intensity level is higher below the barrier. We get an analytic formula for the Laplace transform of the default time and...

Readers may make verbatim copies of this document for non-commercial purposes by any means, provided that this copyright notice appears on all such copies. Practitioners Abstract The optimal hedging model has become the standard theoretical model of normative hedging behavior due to its intuitive tradeoff of expected return with risk, its efficient use of information and its easy implementation...

Readers may make verbatim copies of this document for non-commercial purposes by any means, provided that this copyright notice appears on all such copies. Practitioners Abstract The optimal hedging model has become the standard theoretical model of normative hedging behavior due to its intuitive tradeoff of expected return with risk, its efficient use of information and its easy implementation...

Abstract This paper proposes a multi-reservoir operating policy for water supply by combining target storage curves with the hedging rule. The are derived to solve allocation problem of joint demand. There three steps in proposed methodology: Firstly, optimal release schedule using dynamic programming long-term operation model is established, from which suitable forms identified. Secondly, simu...

Accurately quantifying and robustly hedging options embedded in the guarantees of variable annuities is a crucial task for insurance companies in preventing excessive liabilities. Due to sensitivities of the benefits to tails of the account value distribution, a simple Black-Scholes model is inadequate. A model which realistically describes the real world price dynamics over a long time horizon...

Managerial financial fraud is estimated in the billions of dollars annually in the United States. Since fraud includes obfuscation, misdirection, and fabrication, this study proposes using deception theory as a means of detecting fraud in textual portions of financial statements (10K). A corpus of 101 fraudulent 10Ks was collected from the Securities and Exchange Commission along with 101 match...