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The Froot-Stein model revisited

By N. Hogh, Oliver Linton and J.P. Nielsen

Abstract

We investigate the model of Froot & Stein (1998), a model which has very strong implications for risk management. We argue that their conclusions are too strong and need to be qualified. We also argue that their analysis is incorrect and incomplete. Specifically, there are some unusual consequences of their model, which may be linked to the chosen pricing formula

Topics: HB Economic Theory, HA Statistics
Publisher: Cambridge University Press on behalf of the Institute and Faculty of Actuaries
Year: 2006
DOI identifier: 10.1017/S174849950000004X
OAI identifier: oai:eprints.lse.ac.uk:2697
Provided by: LSE Research Online
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