Hedging-based utility risk measure customized for individual investors

Dong，Linjia1,2; Yang，Zhaojun2

2022-09-01

10.1016/j.orl.2022.07.007

OPERATIONS RESEARCH LETTERS   Impact Factor & Quartile

0167-6377

1872-7468

This paper proposes a hedging-based utility risk measure (HBU) customized for individual investors requiring a comprehensive risk assessment for financial products. We show that HBU is a convex risk measure and if the utility has constant relative risk aversion, HBU is coherent. Roughly speaking, HBU is the opposite of a generalized utility indifference price and it depends on claimants' utility and hedging instruments accessible to them. We present HBU's qualities and provide two examples, explaining HBU's relevance.

Hedging risk Personalized risk measures Risk measures Utility indifference prices

EI ; SCI

English

Corresponding

National Natural Science Foundation of China[72031003];

Operations Research & Management Science

Operations Research & Management Science

WOS:000877913400002

ELSEVIER

20223212551580

Costs

Cost and Value Engineering; Industrial Economics:911 ; Accidents and Accident Prevention:914.1

ENGINEERING

2-s2.0-85135522976

Scopus

1.School of Mathematics,Harbin Institute of Technology,Harbin,China
2.Department of Finance,Southern University of Science and Technology,Shenzhen,China

Dong，Linjia,Yang，Zhaojun. Hedging-based utility risk measure customized for individual investors[J]. OPERATIONS RESEARCH LETTERS,2022,50(5):509-512.

Dong，Linjia,&Yang，Zhaojun.(2022).Hedging-based utility risk measure customized for individual investors.OPERATIONS RESEARCH LETTERS,50(5),509-512.

Dong，Linjia,et al."Hedging-based utility risk measure customized for individual investors".OPERATIONS RESEARCH LETTERS 50.5(2022):509-512.