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scientific article; zbMATH DE number 1786006
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scientific article; zbMATH DE number 1786006 |
Statements
26 September 2002
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knightian uncertainty
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loss aversion
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futures and forward contracts
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0.801174521446228
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0.7686188817024231
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0.7653740644454956
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0.7638723850250244
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0.7380585670471191
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Let \(\pi_p\) be the firm's profit from production taking place from \(t=0\) to \(t=1\). Let \(p_1-p_0\) and \((f_0-f_1)x\) be the firm gains from the forward contract and from futures trading, respectively. Then \(\pi=\pi_p+(p_1-p_0)+(f_0-f_1)x\) is the firm's total profit. Assuming given a von Neumann--Morgenstern utility function and a joint probability density function of \(p_1\) and \(f_1\), the optimal futures position \(x^{\ast}\) is the solution to the maximization problem with the objective function \(Eu(\pi)\). In the paper under review, the optimal futures position is considered assuming Knightian uncertainty and loss aversion. For the entire collection see [Zbl 0983.00031].
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