Questioning dollar cost averaging
When implementing a hedging strategy, the popular dollar cost averaging approach may sometimes be less prudent than the lump-sum method for managing energy risk, writes Tim Simard
Dollar cost averaging (DCA) is a common hedge implementation strategy used by energy producers, end users and electric and gas utilities. Many companies and regulators believe this to be the most prudent method for establishing a hedge position. Yet there are strong reasons why entities using this approach should question the efficacy of the DCA strategy.
The DCA approach was originally associated
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