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The Froot-Stein Model Revisited


Nils Høgh


Nordea Markets

Oliver B. Linton


University of Cambridge

Jens Perch Nielsen


City University London - Cass Business School
November 2003


Abstract:     
We investigate the model of Froot and Stein (1998), a model that has very strong implications for risk management. We argue that their conclusions are too strong and need to be qualified. Also, there are some unusual consequences of their model, which may be linked to the chosen pricing formula.

Number of Pages in PDF File: 10

Keywords: Capital allocation; risk management; second order condition

JEL Classification: G20, G31, G32

working papers series


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Date posted: January 13, 2004  

Suggested Citation

Høgh, Nils, Linton, Oliver B. and Nielsen, Jens Perch, The Froot-Stein Model Revisited (November 2003). Available at SSRN: http://ssrn.com/abstract=484882 or http://dx.doi.org/10.2139/ssrn.484882

Contact Information

Nils Høgh
Nordea Markets ( email )
Christiansbro, Strandgade 3
Copenhagen, 0900C
Denmark
Oliver B. Linton (Contact Author)
University of Cambridge ( email )
Faculty of Economics
Cambridge, CB3 9DD
United Kingdom
Jens Perch Nielsen
City University London - Cass Business School ( email )
106 Bunhill Row
London, EC1Y 8TZ
United Kingdom
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