on utility theory, this paper firstly combined different utility functions with
risk aversion coefficient and constructed different kinds of optimizing problems for hedgers to hedge for
stochastic-payment-typed contingent claim, and then, by the aid of
dynamic programming theory, effective multi-stage hedging strategy is proposed
for different risk-averse hedgers. Lastly, the research results that the
optimal hedging ratios for three kinds of utility functions are equivalent and
do not relate to the risk aversion coefficient.
Zhang, W., Zhou, D. and Liu, L. (2013) Contracts for Changing Times: Sourcing with Raw Material Price Volatility and Information Asymmetry. Manufacturing & Service Operations Management, 16, 133-148.
Ni, J., Chu, L.K., Wu, F., et al. (2012) A Multi-Stage Financial Hedging Approach for the Procurement of Manufacturing Materials. European Journal of Operational Research, 221, 424-431. https://doi.org/10.1016/j.ejor.2012.03.031