We derive a closed-form solution for an optimal intertemporal hedging policy using instantaneous forward contracts to hedge a continuum of non-tradable exposures. The optimal control appears to be a value hedge involving total current value of future earnings. More importantly, hedging decision is independent of risk preferences of the firm or agent. Our model implies several implications for the risk management policy in a firm. In order to ``freeze profits'' a hedge increase is recommended in favourable states of nature, while in bad states the firm should decrease the hedge and wait.
Key words: Optimal hedging; Financial forwards and futures; Long-term exposure; Separability; Hodograph transformation.
JEL classification: C61, G13, C11