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Hedging Risks Thanks to the Market

  • Nicolas Bouleau

Abstract

We will start our discussion with an example. Since the price of the American dollar in euros is quoted at each instant in time, all the players on the currency market who hold a portfolio in dollars and euros can buy and sell continuously one of the currencies against the other. To sell a certain quantity then to rebuy it is not the same as buying the same amount then selling because the price varies at each instant. One clearly tries to sell dollars when the price is high, and buy when it is low, but the price changes in an unpredictable way. Through this buying and selling, the composition of the portfolio varies. Let S t , denote the price of the dollar at time t.

Keywords

Stock Market Financial Market Future Contract Classic Asset Exercise Price 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Springer-Verlag London 1998

Authors and Affiliations

  • Nicolas Bouleau
    • 1
  1. 1.École des PontsParisFrance

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