Computes optimal hedging ratios based on risk measures

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Description

Determines optimal hedging ratios based on risk measures (StD, VaR, EL, ELD, ES, SDR, EVaR, DEVaR, ENT, DENT, ML) by minimization of position risk.

Usage

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risk.hedge(x, y, alpha = c(0.05), beta = 1, p = 2)

Arguments

x

a vector of observations.

y

a vector of observations of the asset used for hedging.

alpha

a vector of probabilities for significance level.

beta

a positive risk aversion parameter.

p

a positive value for the power of deviation terms.

Value

A matrix with values of optimal hedging ratios for each risk measure at all probabilities of interest.

Examples

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## computes optimal hedging ratios between AAPL and SP500.

data(returns)
s <- returns[, 3]
h <- returns[, 2]
risk.hedge(s, h, c(0.01, 0.05))