Dynamic Asset Allocation with Forwards and Futures

1. Front Matter

   Pages i-xvii

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2. The Basics

   1. Forward and Futures Markets

      Pages 3-21

   2. Standard Pricing Results under Deterministic and Stochastic Interest Rates

      Pages 23-34

3. Investment and Hedging

   1. Pure Hedging

      Pages 37-58

   2. Optimal Dynamic Portfolio Choice in Complete Markets

      Pages 59-79

   3. Optimal Dynamic Portfolio Choice in Incomplete Markets

      Pages 81-91

   4. Optimal Currency Risk Hedging

      Pages 93-116

   5. Optimal Spreading

      Pages 117-142

   6. Pricing and Hedging under Stochastic Dividend or Convenience Yield

      Pages 143-161

4. General Equilibrium Pricing

   1. Equilibrium Asset Pricing in an Endowment Economy with Non-Redundant Forward or Futures Contracts

      Pages 165-196

   2. Equilibrium Asset Pricing in a Production Economy with Non-Redundant Forward or Futures Contracts

      Pages 197-219

   3. General Equilibrium Pricing of Futures and Forward Contracts Written on the CPI

      Pages 221-249

5. Back Matter

   Pages 251-263

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This 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.

• Finance
• Futures
• Futures markets
• Hedging
• Investment
• Portfolio
• Stochastic Interest Rates

• Bar Ilan University, Israel

  Abraham Lioui

• University of Paris I Pantheon-Sorbonne, France

  Patrice Poncet

• ESSEC Business School, France

  Patrice Poncet

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