Production and Hedging Decisions under Smooth Ambiguity Aversion

13 Pages Posted: 15 Sep 2012

See all articles by Hideki Iwaki

Hideki Iwaki

Kyoto Sangyo University - Faculty of Business Administration

Yusuke Osaki

Waseda University - School of Commerce

Date Written: March 2012

Abstract

This paper considers production and hedging decisions of firms under ambiguous price risk. We display that the separation property and the full hedging theorem hold in the presence of ambiguity. We also determine the condition that ambiguity aversion increases optimal hedging position.

Keywords: Future hedging, production decision, prudence, smooth ambiguity aversion

Suggested Citation

Iwaki, Hideki and Osaki, Yusuke, Production and Hedging Decisions under Smooth Ambiguity Aversion (March 2012). Available at SSRN: https://ssrn.com/abstract=2146577 or http://dx.doi.org/10.2139/ssrn.2146577

Hideki Iwaki

Kyoto Sangyo University - Faculty of Business Administration ( email )

Motoyama, Kamigamo, Kita-Ku
Kyoto, 6038555
Japan
+81-75-705-1711 (Phone)
+81-75-705-1711 (Fax)

HOME PAGE: http://www.cc.kyoto-su.ac.jp/~iwaki/index-e.html

Yusuke Osaki (Contact Author)

Waseda University - School of Commerce ( email )

1-6-1 Nishiwaseda
Shinjuku, Tokyo 1698050
Japan

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