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Sami Attaoui and Pierre Six
''Hedging demand and the certainty equivalent of wealth''
( 2014, Vol. 34 No.3 )
This paper casts the opportunity set hedging demand in terms of the certainty equivalent of wealth for an investor who considers both consumption and bequest motives and is constrained to invest his asset proportions of wealth in a convex set. We show that the hedge portfolio exactly balances out the unfavorable impact of the opportunity set on the certainty equivalent of wealth.
Keywords: Hedging Demand, Dynamic Opportunity Set, Wealth Certainty Equivalent, Risk Aversion.
Manuscript Received : Jun 05 2013 Manuscript Accepted : Aug 06 2014

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