Moments and properties of multiplicatively constrained bivariate lognormal distribution with applications to futures hedging |
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| Institution: | 1. Department of Economics, College of Business, University of Texas, San Antonio, TX 78249 0633, USA;2. Department of Mathematics and Statistics, McMaster University, Hamilton, Ont., Canada L8S 4K1;1. Department of Geography and Resource Management, The Chinese University of Hong Kong, Shatin, Hong Kong;2. Big Data Decision Analytics (BDDA) Research Centre, The Chinese University of Hong Kong, Shatin, Hong Kong;3. Institute of Space and Earth Information Science, The Chinese University of Hong Kong, Shatin, Hong Kong;1. Department of Geomatics, National Cheng Kung University, Tainan, Taiwan;2. Department of Geomatics, National Cheng Kung University, Tainan, Taiwan;3. Department of Environmental Engineering, National Cheng Kung University, Tainan, Taiwan;1. Department of Economics, University “G. D''Annunzio” of Chieti-Pescara, Viale Pindaro, 42, I-65127 Pescara, Italy;2. Department of Economics and Finance, University of Rome Tor Vergata, via Columbia, 2, I-00133 Rome, Italy;3. Department of Mathematics and Computer Science, University of Perugia, Via Luigi Vanvitelli, 1, I-06123 Perugia, Italy;1. Department of Economics, University “G. D’Annunzio” of Chieti-Pescara, Viale Pindaro, 42, I-65127 Pescara, Italy;2. Katia Colaneri, Department of Economics, University of Perugia, Via Alessandro Pascoli, 20, I-06123 Perugia, Italy;3. Alessandra Cretarola, Department of Mathematics and Computer Science, University of Perugia, Via Luigi Vanvitelli, 1, I-06123 Perugia, Italy |
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| Abstract: | In this paper, we derive explicit expressions for marginal and product moments of a bivariate lognormal distribution when a multiplicative constraint is present. We show that the coefficients of variation always decrease regardless of the multiplicative constraint imposed. We also evaluate the effects of the constraint on the variances and covariance, and present conditions under which the correlation coefficient increases under the presence of such a multiplicative constraint. We finally apply these results to futures hedging analysis and some other financial applications. |
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