| This paper developes a multiperiod model in which hedge adjustments are allowed. The two major marketing alternatives specified in the model are to sell in the spot market or to forward contract using formula pricing. To proxy the underlying forward contract value, the American put call parity (APCP) technique is used. The conceptual framework considers a mean-variance utility function that is maximized sequentially to obtain optimal forward contract and hedge ratios. The closed loop solution guides the dymanic flow of information between decision stages via three essential features: sequential dependence, feedback, and anticipated revision. The empirical model considers a multivariate ARMA-GARCH framework that estimates the time series of A{CP values,... |
