Dynamic Asset Allocation with Forwards and FuturesThis book is an advanced text on the theory of forward and futures markets which aims at providing readers with a comprehensive knowledge of how prices are established and evolve in time, what optimal strategies one can expect the participants to follow, whether they pertain to arbitrage, speculation or hedging, what characterizes such markets and what major theoretical and practical differences distinguish futures from forward contracts. It should be of interest to students (MBAs majoring in finance with quantitative skills and PhDs in finance and financial economics), academics (both theoreticians and empiricists), practitioners, and regulators. Standard textbooks dealing with forward and futures markets generally focus on the description of the contracts, institutional details, and the effective (as opposed to theoretically optimal) use of these instruments by practitioners. The theoretical analysis is often reduced to the (undoubtedly important) cash-and-carry relationship and the computation of the simple, static, minimum variance hedge ratio. This book proposes an alternative approach of these markets from the perspective of dynamic asset allocation and asset pricing theory within an inter-temporal framework that is in line with what has been done many years ago for options markets. |
Contents
Forward and Futures Markets | 3 |
Standard Pricing Results Under Deterministic and Stochastic Interest Rates | 23 |
Investment and Hedging | 35 |
Pure Hedging | 37 |
Optimal Dynamic Portfolio Choice in Complete Markets | 59 |
Optimal Dynamic Portfolio Choice in Incomplete Markets | 81 |
Optimal Currency Risk Hedging | 93 |
Optimal Spreading | 117 |
Pricing and Hedging Under Stochastic Dividend or Convenience Yield | 143 |
General Equilibrium Pricing | 163 |
Equilibrium Asset Pricing In an Endowment Economy With NonRedundant Forward or Futures Contracts | 165 |
Equilibrium Asset Pricing In a Production Economy With NonRedundant Forward or Futures Contracts | 197 |
General Equilibrium Pricing of Futures and Forward Contracts written on the CPI | 221 |
References | 251 |
| 261 | |
Other editions - View all
Dynamic Asset Allocation with Forwards and Futures Abraham Lioui,Patrice Poncet Limited preview - 2005 |
Dynamic Asset Allocation with Forwards and Futures Abraham Lioui,Patrice Poncet No preview available - 2010 |
Common terms and phrases
Applying Ito's lemma arbitrage asset price assumed assumption bond price cash assets chapter contingent claim contract written convenience yield correlated covariance currency denoted derivatives deterministic discount bond dividend dZ(t economy equal equation equilibrium exchange rate financial market forward and futures forward contracts forward or futures forward position forward price forward rate futures contracts futures or forward futures price hedge ratio hedger hedging component hedging term ICAPM incomplete market inflation interest rate risk investor investor's optimal investor's wealth Itô's Lioui market portfolio market prices martingale mean-variance efficient money market account nominal non-redundant non-traded numeraire optimal hedging optimal strategy Poncet price changes prices of risk Proposition pure hedge result risk premium riskless asset risky assets source of risk speculative component spot price strategy using futures T₁ T₂ traded underlying asset V₁ v₂ variables vector volatility wealth dynamics yield curve zero Σα ΣΣ