A Short Note on Sovereign Commodity Risk Management
6 Pages Posted: 19 Jan 2015
Date Written: January 18, 2015
I investigate sovereign risk management using expected utility theory. A proposition is derived under which conditions which degree of hedging is optimal. An application to the case of Russia shows that a risk-acceptant attitude can serve as an explanation of the decisions to bail out Rosneft and to leave some oil exposure unhedged.
Keywords: Sovereign risk management, rationalist explanations, expected utility maximization, commodity risk management, hedging
JEL Classification: C00, D07, F05, H03, H07, N04
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