Welfare Gains from Market Insurance: The Case of Mexican Oil Price Risk

Welfare Gains from Market Insurance: The Case of Mexican Oil Price Risk
Over the past two decades, Mexico has hedged oil price risk through the purchase of put options. We examine the resulting welfare gains using a standard sovereign default model calibrated to Mexican data. We show that hedging increases welfare by reducing income volatility and reducing risk spreads on sovereign debt. We find... READ MORE...

Publication date: March 2018
ISBN 9781484344163
$18.00

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