Information geometry of risks and returns
An innovative product design framework and its geometric interpretation is introduced
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Andrei Soklakov reveals a geometric structure underlying both hedging and investment products. This structure follows from a simple formula expressing investment risks in terms of returns, which informs optimal product design. Optimal pure hedging (including cost-optimal products) and hybrid hedging (where a partial hedge is built into an optimal investment product) are considered. Duality between hedging and investment is demonstrated with applications to optimal
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