The Empirical Minimum-Variance Hedge

摘要: Decision making under unknown true parameters estimation risk) is discussed along with Bayes' and parameter certainty equivalent (PCE) criteria. criterion incorporates risk in a manner consistent expected utility maximization. The PCE method, which the most commonly used, not employed to solve for minimum-variance hedge ratio. Empirical application of ratio addressed illustrated. Simulations shoe that discrepancies between prior sample may lead substantial differences Bayesian hedges.