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The Optimal Hedging Ratio for Contingent Claims Based on Different Risk Aversions

DOI: 10.4236/ojbm.2019.72030, PP. 447-454

Keywords: Risk Aversion, Contingent Claim, Hedging, The Optimal Hedging Ratio

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Based 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.


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