Publication:
Hedging under Counterparty Credit Uncertainty

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dc.contributor.authorMahul, Olivier
dc.contributor.authorCummins, J. David
dc.date.accessioned2012-03-30T07:29:29Z
dc.date.available2012-03-30T07:29:29Z
dc.date.issued2008
dc.description.abstractThis study investigates optimal production and hedging decisions for firms facing price risk that can be hedged with vulnerable contracts, i.e., exposed to nonhedgeable endogenous counterparty credit risk. When vulnerable forward contracts are the only hedging instruments available, the firm's optimal level of production is lower than without credit risk. Under plausible conditions on the stochastic dependence between the commodity price and the counterparty's assets, the firm does not sell its entire production on the vulnerable forward market. When options on forward contracts are also available, the optimal hedging strategy requires a long put position. This provides a new rationale for the hedging role of options in the over-the-counter markets exposed to counterparty credit risk.en
dc.identifier.citationJournal of Futures Markets
dc.identifier.issn02707314
dc.identifier.urihttps://hdl.handle.net/10986/4736
dc.language.isoEN
dc.relation.urihttp://creativecommons.org/licenses/by-nc-nd/3.0/igo
dc.rights.holderWorld Bank
dc.subjectContingent Pricing
dc.subjectFutures Pricing
dc.subjectoption pricing G130
dc.subjectFinancing Policy
dc.subjectFinancial Risk and Risk Management
dc.subjectCapital and Ownership Structure G320
dc.titleHedging under Counterparty Credit Uncertaintyen
dc.title.alternativeJournal of Futures Marketsen
dc.typeJournal Articleen
dc.typeArticle de journalfr
dc.typeArtículo de revistaes
dspace.entity.typePublication
okr.doctypeJournal Article
okr.externalcontentExternal Content
okr.identifier.externaldocumentum1198
okr.journal.nbpages248-263
okr.language.supporteden
okr.peerreviewAcademic Peer Review
okr.relation.associatedurlhttp://search.ebscohost.com/login.aspx?direct=true&db=eoh&AN=0953443&site=ehost-live
okr.relation.associatedurlhttp://www3.interscience.wiley.com/cgi-bin/jhome/34434
okr.volume28
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