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Constant Versus Time Varying Hedge Ratios And Hedging Efficiency In The Biffex Market
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Book Synopsis Constant Versus Time Varying Hedge Ratios and Hedging Efficiency in the Biffex Market by : Nikos K. Nomikos
Download or read book Constant Versus Time Varying Hedge Ratios and Hedging Efficiency in the Biffex Market written by Nikos K. Nomikos and published by . This book was released on 2014 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper estimates time-varying and constant hedge ratios, and investigates their performance in reducing freight rate risk in routes 1 and 1A of the Baltic Freight Index. Time-varying hedge ratios are generated by a bivariate error correction model with a GARCH error structure. We also introduce an augmented GARCH (GARCH-X) model where the error correction term enters in the specification of the conditional covariance matrix. This specification links the concept of disequilibrium (as proxied by the magnitude of the error correction term) with that of uncertainty (as reflected in the time varying second moments of spot and futures prices). In- and out-of-sample tests reveal that the GARCH-X specification provides greater risk reduction than a simple GARCH and a constant hedge ratio. However, it fails to eliminate the riskiness of the spot position to the extent evidenced in other markets in the literature. This is thought to be the result of the heterogeneous composition of the underlying index. It seems that restructuring the composition of the Baltic Freight Index (BFI) so as to reflect homogeneous shipping routes may increase the hedging e�tiveness of the futures contract. This by itself indicates that the imminent introduction of the Baltic Panamax Index (BPI) as the underlying asset of the Baltic International Financial Futures Exchange (BIFFEX) contract is likely to have a beneficial impact on the market.
Book Synopsis Effectiveness of Time-Varying Hedge Ratio with Constant Conditional Correlation by : Sheraz Ahmed
Download or read book Effectiveness of Time-Varying Hedge Ratio with Constant Conditional Correlation written by Sheraz Ahmed and published by . This book was released on 2016 with total page 14 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study demonstrates how hedging methodologies can be evaluated in a modern risk management context and provides a hedging effectiveness of dynamic hedge ratios. The results provide an indication of the superior performance of the time varying hedge ratio as compared with traditional constant ratio. Time varying hedge ratio estimated by CCC-GARCH model shows a clear advantage over linear regression based constant hedge ratio in minimizing the variance (risk) of portfolio returns over the whole 10 years of analysis. The time-varying hedge ratio estimated in our study provides an efficient measure for bond investors to maximize the value of their investments by changing positions in both spot and future markets of U.S. Treasuries with the change in actual yields of cash market. The results are robust in the sense that constant conditional correlation model does take account of the conditional heteroskedasticity present in the data in case of spot market.
Book Synopsis Hedging Effectiveness of Constant and Time Varying Hedge Ratio in Indian Stock and Commodity Futures Markets by : Brajesh Kumar
Download or read book Hedging Effectiveness of Constant and Time Varying Hedge Ratio in Indian Stock and Commodity Futures Markets written by Brajesh Kumar and published by . This book was released on 2010 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines hedging effectiveness of futures contract on a financial asset and commodities in Indian markets. In an emerging market context like India, the growth of capital and commodity futures market would depend on effectiveness of derivatives in managing risk. For managing risk, understanding optimal hedge ratio is critical for devising effective hedging strategy. We estimate dynamic and constant hedge ratio for Samp;P CNX Nifty index futures, Gold futures and Soybean futures. Various models (OLS, VAR, and VECM) are used to estimate constant hedge ratio. To estimate dynamic hedge ratios, we use VAR-MGARCH. We compare in-sample and out-of-sample performance of these models in reducing portfolio risk. It is found that in most of the cases, VAR-MGARCH model estimates of time varying hedge ratio provide highest variance reduction as compared to hedges based on constant hedge ratio. Our results are consistent with findings of Myers (1991), Baillie and Myers (1991), Park and Switzer (1995a,b), Lypny and Powella (1998), Kavussanos and Nomikos (2000), Yang (2001), and Floros and Vougas (2006).
Book Synopsis The Hedging Effectiveness of Single Stock Futures by : Nathalie Senez
Download or read book The Hedging Effectiveness of Single Stock Futures written by Nathalie Senez and published by . This book was released on 2005 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study investigates the hedging effectiveness of Universal Stock Futures trading in London at protecting the underlying spot position from variations in portfolio returns using four different hedge ratios. The hedge ratios under analysis are: the naive 1:1 hedge ratio, the risk-minimizing hedge ratio, a modified version of the risk-minimizing hedge ratio and a time-varying hedge ratio under a GARCH (1,1) process which is allowed to change on a daily basis. The aim of the research is to examine which hedge ratio provides the best protection from market fluctuations when hedging a stock spot position with its futures contract. The findings suggest that the time-varying hedge ratio provides a better hedging strategy than the other techniques although some companies exhibited a smaller portfolio variance when protected with a constant hedge ratio.
Book Synopsis The Effectiveness of Constant and Time-varying Futures Optimal Hedge Ratios by :
Download or read book The Effectiveness of Constant and Time-varying Futures Optimal Hedge Ratios written by and published by . This book was released on 2015 with total page 138 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Time-Varying Hedge Ratios by : John K. Kuwornu
Download or read book Time-Varying Hedge Ratios written by John K. Kuwornu and published by . This book was released on 2005 with total page 20 pages. Available in PDF, EPUB and Kindle. Book excerpt: We use the classic agency model to derive a time-varying optimal hedge ratio for low-frequency time-series data: the type of data used by crop farmers when deciding about production and about their hedging strategy. Rooted in the classic agency framework, the proposed hedge ratio reflects the context of both the crop farmer's decision and the crop farmer's contractual relationships in the marketing channel. An empirical illustration for the Dutch ware potato sector and its futures market in Amsterdam over the period 1971 - 2003 reveals that the time-varying optimal hedge ratio decreased from 0.34 in 1971 to 0.24 in 2003. The hedging effectiveness, according to this ratio, is 39%. These estimates conform better with farmers' interest in using futures contracts for hedging purposes than the much higher estimates obtained when price risk minimisation is the only objective considered.
Book Synopsis Estimation of Constant and Time-Varying Hedge Ratios for Indian Stock Index Futures Market by : P. Srinivasan
Download or read book Estimation of Constant and Time-Varying Hedge Ratios for Indian Stock Index Futures Market written by P. Srinivasan and published by . This book was released on 2012 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates the hedging effectiveness of the S&P CNX Nifty index futures by employing four competing models, viz., the simple Ordinary Least Squares (OLS) method, the Bivariate Vector Autoregressive (BVAR) model, the Vector Error Correction Model (VECM), and the multivariate Generalized Autoregressive Conditional Heteroscedasticity (GARCH) with error correction model. The hedge performances obtained from the different econometric models for the in-sample and out-of-sample periods are compared in terms of variance minimization criterion.
Book Synopsis Hedge Ratio Estimation and Hedging Effectiveness by : Dimitris Kenourgios
Download or read book Hedge Ratio Estimation and Hedging Effectiveness written by Dimitris Kenourgios and published by . This book was released on 2008 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates the hedging effectiveness of the Standard amp; Poor's (Samp;P) 500 stock index futures contract using weekly settlement prices for the period July 3rd, 1992 to June 30th, 2002. Particularly, it focuses on three areas of interest: the determination of the appropriate model for estimating a hedge ratio that minimizes the variance of returns; the hedging effectiveness and the stability of optimal hedge ratios through time; an in-sample forecasting analysis in order to examine the hedging performance of different econometric methods. The hedging performance of this contract is examined considering alternative methods, both constant and time-varying, for computing more effective hedge ratios. The results suggest the optimal hedge ratio that incorporates nonstationarity, long run equilibrium relationship and short run dynamics is reliable and useful for hedgers. Comparisons of the hedging effectiveness and in-sample hedging performance of each model imply that the error correction model (ECM) is superior to the other models employed in terms of risk reduction. Finally, the results for testing the stability of the optimal hedge ratio obtained from the ECM suggest that it remains stable over time.
Book Synopsis Futures Hedging when the Composition of the Underlying Asset Changes; The Case of the BIFFEX Contract by : Nikos K. Nomikos
Download or read book Futures Hedging when the Composition of the Underlying Asset Changes; The Case of the BIFFEX Contract written by Nikos K. Nomikos and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This article is concerned with the hedging effectiveness of futures contracts whose underlying asset is an index, when the structure of this index is changing. The case of the freight futures (BIFFEX) contract is examined here. Investigation of this issue is particularly interesting as the composition of its underlying asset, the Baltic Freight Index (BFI), has been revised on a number of occasions in order to improve the hedging performance of the market; previous empirical evidence on the market indicates substantially lower variance reduction (4-19%), compared to other markets (up to 98%). The BFI is a weighted average dry-cargo freight rate index, compiled from actual freight rates on 11 shipping routes that are dissimilar in terms of vessel sizes and transported commodities. The hedging effectiveness of the market is investigated using both constant and time-varying hedge ratios, estimated through bivariate error correction GARCH models. Our results indicate that the effectiveness of the BIFFEX contract as a centre For risk management has strengthened over the recent years as a result of tbe more homogeneous composition of the index. This by itself indicates that the latest restructuring of the index, in November 1999, which is aimed at increasing its homogeneity even further, is likely to bave a beneficial impact on tbe market.
Book Synopsis M-GARCH Hedge Ratios and Hedging Effectiveness in Australian Futures Markets by : Wenling Yang
Download or read book M-GARCH Hedge Ratios and Hedging Effectiveness in Australian Futures Markets written by Wenling Yang and published by . This book was released on 2001 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Handbook of Maritime Economics and Business by : Costas Grammenos
Download or read book The Handbook of Maritime Economics and Business written by Costas Grammenos and published by Taylor & Francis. This book was released on 2013-07-04 with total page 1184 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book is the founding title in the Grammenos Library. The diversity of the subjects covered is unique and the results of research developed over many years are not only comprehensive, but also have important implications on real life issues in maritime business. The new edition covers a vast number of topics, including: • Shipping Economics and Maritime Nexus • International Seaborne Trade • Economics of Shipping Market and Shipping Cycles • Economics of Shipping Sectors • Issues in Liner Shipping • Economics of Maritime Safety and Seafaring Labour Market • National and International Shipping Policies • Aspects of Shipping Management and Operations• Shipping Investment and Finance • Port Economics and Management • Aspects of International Logistics
Book Synopsis Sudden Changes in Variance and Time Varying Hedge Ratios by : Enrique Salvador
Download or read book Sudden Changes in Variance and Time Varying Hedge Ratios written by Enrique Salvador and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyzes the influence of sudden changes in the unconditional volatility on the estimation and forecast of volatility and its impact on futures hedging strategies. We employ several multivariate GARCH models to estimate the optimal hedge ratios for the Spanish stock market including in each one some well-known patterns that may affect volatility forecasts (asymmetry and sudden changes). The main empirical results show that more complex models including sudden changes in volatility outperform the simpler models in hedging effectiveness both with in-sample and out-of-sample analysis. However, the evidence is stronger when the tail loss distribution is used as a measure for the effectiveness Value at Risk (VaR) and Expected Shortfall (ES) suggesting that traditional measures based on the variance of the hedge portfolio should be used with caution.
Book Synopsis Testing for Time-varying Optimal Hedge Ratios in the 90 Day Bank Accepted Bill Futures Market by : Ross Endres
Download or read book Testing for Time-varying Optimal Hedge Ratios in the 90 Day Bank Accepted Bill Futures Market written by Ross Endres and published by . This book was released on 1992 with total page 338 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The International Handbook of Shipping Finance by : Manolis G. Kavussanos
Download or read book The International Handbook of Shipping Finance written by Manolis G. Kavussanos and published by Springer. This book was released on 2016-11-10 with total page 459 pages. Available in PDF, EPUB and Kindle. Book excerpt: The International Handbook of Shipping Finance is a one-stop resource, offering comprehensive reference to theory and practice in the area of shipping finance. In the multibillion dollar international shipping industry, it is important to understand the various issues involved in the finance of the sector. This involves the identification and evaluation of the alternative sources of capital available for financing the ships, including the appraisal and budgeting of shipping investment projects; legal and insurance aspects of ship finance; the financial analysis and modelling of investment projects; mergers and acquisitions; and the commercial and market risk management issues involved. Edited by two leading academics in this area, and with contributions from 25 prominent market practitioners and academics over 16 chapters, this Handbook covers shipping finance and banking, maritime financial management and investments. As such, it includes: shipping markets; asset backed finance; shipbuilding finance; debt finance; public and private equity and debt markets; structured finance; legal aspects and key clauses of ship mortgages; marine insurance; mechanisms for handling defaulted loans; investment appraisal and capital budgeting; financial analysis and investment modelling; business risk management and freight derivatives; and mergers and acquisitions. Thus, the Handbook offers a rigorous understanding of the different aspects of modern shipping finance and maritime financial management and investments, the various characteristics of the available products, the capital needs and requirements, and a clear view on the different financial management strategies through a series of practical examples and applications. Technical where appropriate, but grounded in market reality, this is a “must-have” reference for anyone involved in shipping finance, from bank practitioners and commodity trading houses, to shipbrokers, lawyers and insurance houses as well as to university students studying shipping finance. Table of Contents Preface by Editors Manolis Kavussanos, Professor, Director, MSc in International Shipping, Finance and Management, Athens University of Economics and Business, Greece Ilias Visvikis, Professor, Director Executive Education and Professional Development, World Maritime University, Sweden Chapter 1: Shipping Markets and their Economic Drivers Jan-Henrik Huebner, Head of Shipping Advisory, DNV GL, Germany Chapter 2: Asset Risk Assessment, Analysis and Forecasting in Asset Backed Finance Henriette Brent Petersen, Head of Shipping & Offshore Research, DVB Bank SE, The Netherlands Chapter 3: Overview of Ship Finance Fotis Giannakoulis, Research Vice President, Morgan Stanley, USA Chapter 4: Shipbuilding Finance Charles Cushing, C.R. Cushing & Co. Inc., USA Chapter 5: Debt Financing in Shipping George Paleokrassas, Partner, Watson, Farley & Williams, Greece Chapter 6: Public Debt Markets for Shipping Basil Karatzas, Founder & CEO, Karatzas Marine Advisors & Co., USA Chapter 7: Public and Private Equity Markets Jeffrey Pribor, Global Head, Maritime Investment Banking, Jefferies LLC, USA Cecilie Lind, Associate Investment Banking, Jefferies LLC, USA Chapter 8: Structured Finance in Shipping Contributor: Ioannis Alexopoulos, Director, Shipping Financier, Eurofin Group, Greece Nikos Stratis, Managing Director of Augustea Group, UK Chapter 9: Key Clauses of a Shipping Loan Agreement Kyriakos Spoullos, Solicitor, Norton Rose Fulbright, Greece Chapter 10: Legal Aspects of Ship Mortgages Simon Norton, Lecturer, Cardiff Business School, UK Claudio Chistè, Investec Bank Plc., UK Chapter 11: Reasons and Mechanics of Handling Defaulted Shipping Loans and Methods of Recovery Dimitris Anagnostopoulos, Board Member & Director, Aegean Baltic Bank, Greece Philippos Tsamanis, VP - Head of Shipping, Aegean Baltic Bank, Greece Chapter 12: Marine Insurance Marc Huybrechts, Professor, University of Antwerp, Belgium Theodora Nikaki, Associate Professor, Swansea University, UK Chapter 13: Maritime Investment Appraisal and Budgeting Wolfgang Drobetz, Professor, University of Hamburg, Germany Stefan Albertijn, CEO, HAMANT Beratungs-und Investitions GmbH, Germany Max Johns, Managing Director, German Shipowners’ Association, Germany Chapter 14: Financial Analysis and Modelling of Ship Investments Lars Patterson, Shipping Investment Analyst, Pacomarine Limited, UK Chapter 15: Maritime Business Risk Management Manolis Kavussanos, Professor, Director, MSc in International Shipping, Finance and Management, Athens University of Economics and Business, Greece Ilias Visvikis, Professor, Director Executive Education and Professional Development, World Maritime University, Sweden Chapter 16: Mergers and Acquisitions in Shipping George Alexandridis, Associate Professor, ICMA Centre, University of Reading, UK Manish Singh, Manish Singh, Group Director - Strategy and M&A, V. Group Limited, UK
Book Synopsis Essays on Port Economics by : Pablo Coto-Millán
Download or read book Essays on Port Economics written by Pablo Coto-Millán and published by Springer Science & Business Media. This book was released on 2010-07-23 with total page 347 pages. Available in PDF, EPUB and Kindle. Book excerpt: The aim of this book is to offer a comprehensive overview of the economics of ports for scientists, students and professionals. The text is divided into five self-contained parts: the first chapter defines the demand for port services using an econometric approach. The second part analyzes the provision of port services using the production, cost, investment and profit functions of various ports. The third part combines the two previous parts in order to propound a general equilibrium approach. The fourth part looks at regulation, efficiency and the existence of ports as natural monopolies. Finally, the fifth part uses Cost Benefit Analysis for an economic evaluation of the feasibility of building new ports or enlarging existing ones.
Book Synopsis The Blackwell Companion to Maritime Economics by : Wayne K. Talley
Download or read book The Blackwell Companion to Maritime Economics written by Wayne K. Talley and published by John Wiley & Sons. This book was released on 2012-02-13 with total page 766 pages. Available in PDF, EPUB and Kindle. Book excerpt: Maritime Economics The Blackwell Companion to Maritime Economics presents a comprehensive and in-depth coverage of shipping and port economics. Featuring contributions from the most respected international specialists in the field, this reference offers up-to-date insights into maritime carriers and their markets (e.g., freight, intermodal and passenger), shipping economics (e.g., dry bulk, liquid bulk, container, regulation, taxation, seafaring, safety and piracy), ship economics (e.g., equity, bond and hedging ship finance) and port economics (e.g., governance, labor, competition, efficiency, choice, investment, clusters, inspection and security). In addition to providing a comprehensive survey of the literature on past and current practices on a wide range of maritime topics, new empirical research on safety and piracy in shipping, ship finance, and container terminal efficiency is presented as well as original theories for maritime carriers and ports that provide greater insights into their operations. With its unprecedented breadth of coverage and range of scholarship, The Blackwell Companion to Maritime Economics represents the new standard resource for any and all topics related to maritime economics.
Book Synopsis Freight Derivatives and Risk Management in Shipping by : Manolis G. Kavussanos
Download or read book Freight Derivatives and Risk Management in Shipping written by Manolis G. Kavussanos and published by Taylor & Francis. This book was released on 2021-04-29 with total page 555 pages. Available in PDF, EPUB and Kindle. Book excerpt: This advanced practical textbook deals with the issue of risk analysis, measurement and management in the shipping industry. It identifies and analyses the sources of risk in the shipping business and explores in detail the “traditional” and “modern” strategies for risk management at both the investment and operational levels of the business. The special features and characteristics of all available freight derivative products are compared and contrasted between them. Practical applications of derivatives are showcased through realistic practical examples, while a number of concepts across the contents of this book appear for the first time in the literature. The book also serves as “the reference” point for researchers in the area, helping them to enhance their knowledge of risk management and derivatives in the shipping industry, but also to students at both undergraduate and postgraduate levels. Finally, it provides a comprehensive manual for practitioners wishing to engage in the financial risk management of maritime business. This second edition has been fully updated in order to incorporate the numerous developments in the industry since its first edition in 2006. New chapters have been introduced on topics such as Market Risk Measurement, Credit Risk and Credit Derivatives, and Statistical Methods to Quantify Risk. Furthermore, the second edition of this book builds upon the successful first edition which has been extensively (i) taught in a number of Universities around the world and (ii) used by professionals in the industry. Shipowners, professionals in the shipping industry, risk management officers, credit officers, traders, investors, students and researchers will find the book indispensable in order to understand how risk management and hedging tools can make the difference for companies to remain competitive and stay ahead of the rest.
