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Portfolio Constraints with hedgeslf
The other hedging function, hedgeslf
, attempts to minimize portfolio sensitivities such that the rebalanced portfolio maintains a constant value (the rebalanced portfolio is hedged against market moves and is closest to being self-financing). If a self-financing hedge is not found, hedgeslf
tries to rebalance a portfolio to minimize sensitivities.
From a least squares systems approach, hedgeslf
first attempts to minimize cost in the same way that hedgeopt
does. If it cannot solve this problem (a no cost, self-financing hedge is not possible), hedgeslf
proceeds to minimize sensitivities like hedgeopt
. Thus, the discussion of constraints for hedgeopt
is directly applicable to hedgeslf
as well.
![]() | Example: Under-Determined System | Function Reference | ![]() |