Hedging, Pareto Optimality, and Good Deals |
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| Authors: | Hirbod Assa Keivan Mallahi Karai |
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| Affiliation: | 1. Department of Economics, Concordia University, 1455 de Maisonneuve Blvd. West, H 1155, Montreal, Quebec, H3G 1M8, Canada
2. Department of Mathematics, Jacobs University, Campus Ring I Jacobs University, 28759, Bremen, Germany
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| Abstract: | In this paper, we will describe a framework that allows us to connect the problem of hedging a portfolio in finance to the existence of Pareto optimal allocations in economics. We will show that the solvability of both problems is equivalent to the No Good Deals assumption. We will then analyze the case of co-monotone additive monetary utility functions and risk measures. |
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