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Title: Mean-variance hedging with oil futures
Authors: Wang, Liao
Wissel, Johannes
Keywords: mean-variance hedging
fuel hedging
energy futures market
Issue Date: 29-Aug-2011
Abstract: We analyze mean-variance-optimal dynamic hedging strategies in oil producers and consumers. In a model for the oil spot and futures market with Gaussian convenience yield curves and a stochastic market price of risk, we find analytical solutions for the optimal trading strategies. An implementation of our strategies in an out-of-sample test on market data shows that the hedging strategies improve long-term return risk profiles of both the producer and the consumer.
Appears in Collections:ORIE Technical Reports

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