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Risk management with options and futures under liquidity risk

Research output: Contribution to Journal/Magazine › Journal article › peer-review

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Risk management with options and futures under liquidity risk. / Adam-Müller, A F A; Panaretou, A.
In: Journal of Futures Markets, Vol. 29, No. 4, 04.2009, p. 297-318.

Research output: Contribution to Journal/Magazine › Journal article › peer-review

Harvard

Adam-Müller, AFA & Panaretou, A 2009, 'Risk management with options and futures under liquidity risk', Journal of Futures Markets, vol. 29, no. 4, pp. 297-318. https://doi.org/10.1002/fut.20362

APA

Adam-Müller, A. F. A., & Panaretou, A. (2009). Risk management with options and futures under liquidity risk. Journal of Futures Markets, 29(4), 297-318. https://doi.org/10.1002/fut.20362

Vancouver

Adam-Müller AFA, Panaretou A. Risk management with options and futures under liquidity risk. Journal of Futures Markets. 2009 Apr;29(4):297-318. doi: 10.1002/fut.20362

Author

Adam-Müller, A F A ; Panaretou, A. / Risk management with options and futures under liquidity risk. In: Journal of Futures Markets. 2009 ; Vol. 29, No. 4. pp. 297-318.

Bibtex

@article{1945a39a54f84b1b8c3b2027e28eae40,
title = "Risk management with options and futures under liquidity risk",
abstract = "Futures hedging creates liquidity risk through marking to market. Liquidity risk matters if interim losses on a futures position have to be financed at a markup over the risk-free rate. This study analyzes the optimal risk management and production decisions of a firm facing joint price and liquidity risk. It provides a rationale for the use of options on futures in imperfect capital markets. If liquidity risk materializes, the firm sells options on futures in order to partly cover this liquidity need. It is shown that liquidity risk reduces the optimal hedge ratio and that options are not normally used before a liquidity need actually arises. ",
author = "Adam-M{\"u}ller, {A F A} and A Panaretou",
note = "The definitive version is available at www3.interscience.wiley.com",
year = "2009",
month = apr,
doi = "10.1002/fut.20362",
language = "English",
volume = "29",
pages = "297--318",
journal = "Journal of Futures Markets",
issn = "0270-7314",
publisher = "Wiley-Liss Inc.",
number = "4",

}

RIS

TY - JOUR

T1 - Risk management with options and futures under liquidity risk

AU - Adam-Müller, A F A

AU - Panaretou, A

N1 - The definitive version is available at www3.interscience.wiley.com

PY - 2009/4

Y1 - 2009/4

N2 - Futures hedging creates liquidity risk through marking to market. Liquidity risk matters if interim losses on a futures position have to be financed at a markup over the risk-free rate. This study analyzes the optimal risk management and production decisions of a firm facing joint price and liquidity risk. It provides a rationale for the use of options on futures in imperfect capital markets. If liquidity risk materializes, the firm sells options on futures in order to partly cover this liquidity need. It is shown that liquidity risk reduces the optimal hedge ratio and that options are not normally used before a liquidity need actually arises.

AB - Futures hedging creates liquidity risk through marking to market. Liquidity risk matters if interim losses on a futures position have to be financed at a markup over the risk-free rate. This study analyzes the optimal risk management and production decisions of a firm facing joint price and liquidity risk. It provides a rationale for the use of options on futures in imperfect capital markets. If liquidity risk materializes, the firm sells options on futures in order to partly cover this liquidity need. It is shown that liquidity risk reduces the optimal hedge ratio and that options are not normally used before a liquidity need actually arises.

U2 - 10.1002/fut.20362

DO - 10.1002/fut.20362

M3 - Journal article

VL - 29

SP - 297

EP - 318

JO - Journal of Futures Markets

JF - Journal of Futures Markets

SN - 0270-7314

IS - 4

ER -