The mathematics of hedging

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Title: The mathematics of hedging
Author: Chen, Yi-Jen Elaine
Abstract: Possessing the knowledge to hedge energy price risks properly is essential and crucial for running a long -term business . In the past , many hedging instruments have been invented and widely used . By using these derivatives , decision makers reduce the price risk to a certain degree . To apply these hedging instruments to the perfect hedging strategies correctly , it is necessary to be familiar with these tools in the first place . This work introduces the financial tools widely applied in hedging , including forward contracts , futures , swaps and options . It also introduces the hedging strategies used on energy hedging . Since individuals are creating strategies according to their unique risk appetite and collected information , this work presents three risk appetites and a method of distinguishing valuable information . With the contribution of this thesis , future works can be done in the field that connect the information valuation and energy hedging by changing the behavior in each risk appetites’ hedging ratio .
URI: http : / /hdl .handle .net /2152 /ETD -UT -2009 -12 -590
Date: 2010-08-24

Citation

The mathematics of hedging. Master's thesis, The University of Texas at Austin. Available electronically from http : / /hdl .handle .net /2152 /ETD -UT -2009 -12 -590 .

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