Λεπτομέρειες βιβλιογραφικής εγγραφής
| Τίτλος: |
Pre-hedging. |
| Συγγραφείς: |
Muhle-Karbe, Johannes1 (AUTHOR) jmuhleka@ic.ac.uk, Oomen, Roel1 (AUTHOR) roel.oomen@db.com |
| Πηγή: |
Operations Research. May/Jun2026, Vol. 74 Issue 3, p1221-1240. 20p. |
| Θεματικοί όροι: |
*Hedging (Finance), *Spread (Finance), *Risk managers, *Market makers |
| Περίληψη: |
The paper "Pre-hedging" studies a dealer that pre-hedges an anticipated potential trade and analyses how this affects the client's overall execution outcome. It shows that pre-hedging can benefit both parties: Improved risk management over an extended horizon then enables the dealer to charge reduced spreads that more than offset any adverse impact the pre-hedging activity has on the execution price. However, when a dealer pre-hedges too aggressively, this can be detrimental to the client. Timing uncertainty of the potential trade is an effective control held by the client to mitigate any counterproductive pre-hedging. Our results are robust to a setting where competing dealers simultaneously pre-hedge. This paper studies a dealer that pre-hedges an anticipated potential trade, and we analyze how this affects the client's overall execution outcome. We show that pre-hedging can benefit both parties: Improved risk management over an extended horizon enables the dealer to charge reduced spreads that more than offset any adverse impact the pre-hedging activity has on the execution price. However, when a dealer pre-hedges too aggressively, this can be detrimental to the client. Timing uncertainty of the potential trade is an effective control held by the client to mitigate any counterproductive pre-hedging. Our results are robust to a setting where competing dealers simultaneously pre-hedge. Supplemental Material: All supplemental materials, including the code, data, and files required to reproduce the results, are available at https://doi.org/10.1287/opre.2024.1011. [ABSTRACT FROM AUTHOR] |
|
Copyright of Operations Research is the property of INFORMS: Institute for Operations Research & the Management Sciences and its content may not be copied or emailed to multiple sites without the copyright holder's express written permission. Additionally, content may not be used with any artificial intelligence tools or machine learning technologies. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.) |
| Βάση Δεδομένων: |
Business Source Index |
