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Hedge Ratio Estimation And Hedging Effectiveness
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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 Hedge Ratio Estimation and Hedging Effectiveness of Stock Index Futures by : Panagiotis Drosos
Download or read book Hedge Ratio Estimation and Hedging Effectiveness of Stock Index Futures written by Panagiotis Drosos and published by . This book was released on 2001 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Hedge Ratio Estimation and Hedging Effectiveness by : Jing Li
Download or read book Hedge Ratio Estimation and Hedging Effectiveness written by Jing Li and published by . This book was released on 2009 with total page 92 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Hedge Ratio Estimation and Hedging Effectiveness in China's Index Futures Market by : Yi Ding
Download or read book Hedge Ratio Estimation and Hedging Effectiveness in China's Index Futures Market written by Yi Ding and published by . This book was released on 2008 with total page 74 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Hedging with Currency Futures by : Qian Meng
Download or read book Hedging with Currency Futures written by Qian Meng and published by . This book was released on 2004 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
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 Estimation of Optimal Hedge Ratios for Currency Futures and Measurement of Hedging Effectiveness by : Huijun Dai
Download or read book Estimation of Optimal Hedge Ratios for Currency Futures and Measurement of Hedging Effectiveness written by Huijun Dai and published by . This book was released on 2003 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Estimation of Hedge Ratios and Analysis of Hedging Effectiveness by : Wen-Yen Peng
Download or read book Estimation of Hedge Ratios and Analysis of Hedging Effectiveness written by Wen-Yen Peng and published by . This book was released on 2004 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Sensitivity of the Optimal Hedge Ratio to Model Specification by : Imad A. Moosa
Download or read book The Sensitivity of the Optimal Hedge Ratio to Model Specification written by Imad A. Moosa and published by . This book was released on 2003 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates the effect of the choice of the model used to estimate the hedge ratio on the effectiveness of futures and cross-currency hedging using data from the stock and foreign exchange markets. Four different models are used for this purpose to estimate the hedge ratio. The results show that model specification has little effect on the hedging effectiveness. It seems that what matters most is the correlation between the prices of the unhedged position and the hedging instrument.
Book Synopsis Hedge Ratio, Hedging Strategy, and Hedging Effectiveness by : Yun C. Lin
Download or read book Hedge Ratio, Hedging Strategy, and Hedging Effectiveness written by Yun C. Lin and published by . This book was released on 1987 with total page 366 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 A Copula-Based Quantile Risk Measure Approach to Estimate the Optimal Hedge Ratio by : Massimiliano Barbi
Download or read book A Copula-Based Quantile Risk Measure Approach to Estimate the Optimal Hedge Ratio written by Massimiliano Barbi and published by . This book was released on 2015 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We propose an innovative theoretical model to determine the optimal hedge ratio (OHR) with futures contracts as the minimizer of a quantile risk measure. This class of measures is very large and allows to recover the minimum-VaR and the minimum-expected shortfall hedge ratios as special cases. The copula representation of quantiles yields an accurate and flexible estimation of the dependence structure between the spot and the futures position. Employing data for the main UK and US indices, and EUR/USD and EUR/GBP exchange rates, we investigate the hedging effectiveness of our model compared to that of existing approaches. We document that our model improves upon the hedging performance of minimum-VaR and minimum-expected shortfall hedge ratios, provided that the copula shows an acceptable fit to the data.
Book Synopsis Time-Varying Distribution and Hedging Effectiveness of Three Pacific-Basin Stock Futures by : Taufiq Choudhry
Download or read book Time-Varying Distribution and Hedging Effectiveness of Three Pacific-Basin Stock Futures written by Taufiq Choudhry and published by . This book was released on 2001 with total page 23 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates the hedging effectiveness of Australian, Hong Kong and Japanese stock futures markets. For each market two sets of futures indices are used in the empirical tests. Effectiveness of four different hedging ratios depending on different estimation procedures are investigated. The unhedged, the traditional hedge and the minimum variance hedge ratios are all constant while the bivariate GARCH hedge ratio is time-varying. The effectiveness of the hedge ratio are compared by investigating the out-of-sample performance of the four ratios. The whole sample consist of daily returns from January 1990 to December 1998. Two out-of-sample periods are used January1997 to December 1998 (two years) and from January 1998 to December 1998 (one year). Results show that the time-varying GARCH hedge ratio out-performs the constant ratios in most of the cases but not all. This is true using both out-of-sample periodsKeyWords: Hedge Ratio, Bivariate GARCH, Cash Index, Futures Index, Variance.
Book Synopsis Stock Index Futures Hedging by : Phil Holmes
Download or read book Stock Index Futures Hedging written by Phil Holmes and published by . This book was released on 1994 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Determination of an Optimal Hedge Ratio and a Generalized Measure of Risk by : Gang Li
Download or read book The Determination of an Optimal Hedge Ratio and a Generalized Measure of Risk written by Gang Li and published by . This book was released on 2006 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Hedging written by John Cotter and published by . This book was released on 2014 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the volatility and covariance dynamics of cash and futures contracts that underlie the Optimal Hedge Ratio (OHR) across different hedging time horizons. We examine whether hedge ratios calculated over a short term hedging horizon can be scaled and successfully applied to longer term horizons. We also test the equivalence of scaled hedge ratios with those calculated directly from lower frequency data and compare them in terms of hedging effectiveness. Our findings show that the volatility and covariance dynamics may differ considerably depending on the hedging horizon and this gives rise to significant differences between short term and longer term hedges. Despite this, scaling provides good hedging outcomes in terms of risk reduction which are comparable to those based on direct estimation.
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.
