| Autor: |
Florent Gallien, Serge Kassibrakis, Semyon Malamud |
| Jazyk: |
angličtina |
| Rok vydání: |
2018 |
| Předmět: |
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| Zdroj: |
Risks, Vol 6, Iss 4, p 112 (2018) |
| Druh dokumentu: |
article |
| ISSN: |
2227-9091 |
| DOI: |
10.3390/risks6040112 |
| Popis: |
We solve the problem of optimal risk management for an investor holding an illiquid, alpha-generating fund and hedging his/her position with a liquid futures contract. When the investor is subject to a lower bound on net return, he/she is forced to reduce the total risk of his/her portfolio after a loss. In this case, he/she faces a tradeoff of either paying the transaction costs and deleveraging or keeping his/her current position in the illiquid instrument and hedging away some of the risk while keeping the residual, unhedgeable risk on his/her balance sheet. We explicitly characterize this tradeoff and study its dependence on asset characteristics. In particular, we show that higher alpha and lower beta typically widen the no-trading zone, while the impact of volatility is ambiguous. |
| Databáze: |
Directory of Open Access Journals |
| Externí odkaz: |
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