Banking firm and hedging over the business cycle
Autor(a) principal: | |
---|---|
Data de Publicação: | 2010 |
Outros Autores: | |
Tipo de documento: | Artigo |
Idioma: | eng |
Título da fonte: | Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
Texto Completo: | http://hdl.handle.net/10400.5/15608 |
Resumo: | This paper examines the behavior of a banking firm under risk. The banking firm can hedge its risk exposure by trading futures contracts. The banking firm is risk averse and possesses a utility function defined over its end-of-period income and a state variable that denotes the business cycle of the economy. We show that the banking firm optimally opts for an overhedge or an under-hedge, depending on whether the returns on the futures contracts are negatively or positively correlated with the business cycle of the economy, respectively. Thus, the business cycle of the economy is an important determinant in shaping the banking firm’s optimal hedging strategy. |
id |
RCAP_525c06ef50fa10a95aec16e449ee5bba |
---|---|
oai_identifier_str |
oai:www.repository.utl.pt:10400.5/15608 |
network_acronym_str |
RCAP |
network_name_str |
Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
repository_id_str |
7160 |
spelling |
Banking firm and hedging over the business cycleBanks · Return risk · Hedging · Business cycle · State-dependent utilityReturn riskHedgingBusiness cycleState-dependent utilityThis paper examines the behavior of a banking firm under risk. The banking firm can hedge its risk exposure by trading futures contracts. The banking firm is risk averse and possesses a utility function defined over its end-of-period income and a state variable that denotes the business cycle of the economy. We show that the banking firm optimally opts for an overhedge or an under-hedge, depending on whether the returns on the futures contracts are negatively or positively correlated with the business cycle of the economy, respectively. Thus, the business cycle of the economy is an important determinant in shaping the banking firm’s optimal hedging strategy.Springer VerlagRepositório da Universidade de LisboaBroll, UdoKit, Pong Wong2018-06-14T08:53:03Z2010-042010-04-01T00:00:00Zinfo:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/articleapplication/pdfhttp://hdl.handle.net/10400.5/15608engBroll, Udo e Kit Pong Wong (2010). "Banking firm and hedging over the business cycle". Portuguese Economic Journal, 9(1):29-331617-982X (print)10.1007/s10258-010-0055-7info:eu-repo/semantics/openAccessreponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãoinstacron:RCAAP2023-03-06T14:45:32Zoai:www.repository.utl.pt:10400.5/15608Portal AgregadorONGhttps://www.rcaap.pt/oai/openaireopendoar:71602024-03-19T17:01:14.564016Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãofalse |
dc.title.none.fl_str_mv |
Banking firm and hedging over the business cycle |
title |
Banking firm and hedging over the business cycle |
spellingShingle |
Banking firm and hedging over the business cycle Broll, Udo Banks · Return risk · Hedging · Business cycle · State-dependent utility Return risk Hedging Business cycle State-dependent utility |
title_short |
Banking firm and hedging over the business cycle |
title_full |
Banking firm and hedging over the business cycle |
title_fullStr |
Banking firm and hedging over the business cycle |
title_full_unstemmed |
Banking firm and hedging over the business cycle |
title_sort |
Banking firm and hedging over the business cycle |
author |
Broll, Udo |
author_facet |
Broll, Udo Kit, Pong Wong |
author_role |
author |
author2 |
Kit, Pong Wong |
author2_role |
author |
dc.contributor.none.fl_str_mv |
Repositório da Universidade de Lisboa |
dc.contributor.author.fl_str_mv |
Broll, Udo Kit, Pong Wong |
dc.subject.por.fl_str_mv |
Banks · Return risk · Hedging · Business cycle · State-dependent utility Return risk Hedging Business cycle State-dependent utility |
topic |
Banks · Return risk · Hedging · Business cycle · State-dependent utility Return risk Hedging Business cycle State-dependent utility |
description |
This paper examines the behavior of a banking firm under risk. The banking firm can hedge its risk exposure by trading futures contracts. The banking firm is risk averse and possesses a utility function defined over its end-of-period income and a state variable that denotes the business cycle of the economy. We show that the banking firm optimally opts for an overhedge or an under-hedge, depending on whether the returns on the futures contracts are negatively or positively correlated with the business cycle of the economy, respectively. Thus, the business cycle of the economy is an important determinant in shaping the banking firm’s optimal hedging strategy. |
publishDate |
2010 |
dc.date.none.fl_str_mv |
2010-04 2010-04-01T00:00:00Z 2018-06-14T08:53:03Z |
dc.type.status.fl_str_mv |
info:eu-repo/semantics/publishedVersion |
dc.type.driver.fl_str_mv |
info:eu-repo/semantics/article |
format |
article |
status_str |
publishedVersion |
dc.identifier.uri.fl_str_mv |
http://hdl.handle.net/10400.5/15608 |
url |
http://hdl.handle.net/10400.5/15608 |
dc.language.iso.fl_str_mv |
eng |
language |
eng |
dc.relation.none.fl_str_mv |
Broll, Udo e Kit Pong Wong (2010). "Banking firm and hedging over the business cycle". Portuguese Economic Journal, 9(1):29-33 1617-982X (print) 10.1007/s10258-010-0055-7 |
dc.rights.driver.fl_str_mv |
info:eu-repo/semantics/openAccess |
eu_rights_str_mv |
openAccess |
dc.format.none.fl_str_mv |
application/pdf |
dc.publisher.none.fl_str_mv |
Springer Verlag |
publisher.none.fl_str_mv |
Springer Verlag |
dc.source.none.fl_str_mv |
reponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação instacron:RCAAP |
instname_str |
Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação |
instacron_str |
RCAAP |
institution |
RCAAP |
reponame_str |
Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
collection |
Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
repository.name.fl_str_mv |
Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação |
repository.mail.fl_str_mv |
|
_version_ |
1799131101201956864 |