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Realized hedge ratio: Predictability and hedging performance
International Review of Financial Analysis, 2016Abstract This study explores the dynamic properties and predictability of the Realized Minimum Variance Hedge Ratio (RMVHR), constructed from five-minute spot and future returns of two stock indices and two exchange rates. A number of econometric models are employed to forecast directly the RMVHR and the out-of-sample performance is evaluated ...
Chrysi E. Markopoulou +2 more
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Model risk adjusted hedge ratios
Journal of Futures Markets, 2009AbstractMost option pricing models assume all parameters except volatility are fixed; yet they almost invariably change on re‐calibration. This article explains how to capture the model risk that arises when parameters that are assumed constant have calibrated values that change over time and how to use this model risk to adjust the price hedge ratios ...
Carol Alexander +2 more
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A Note on Minimum Riskiness Hedge Ratio
SSRN Electronic Journal, 2014Regardless of the distributions of spot and futures returns, the hedge ratio determined by minimizing the portfolio’s Aumann and Serrano (2008) index of riskiness is always smaller than the hedge ratio determined by minimizing the portfolio’s variance. It is also demonstrated that the Foster and Hart (2009) riskiness hedge ratio does not exist.
Sina Ehsani, Donald Lien
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OPTIMAL HEDGING RATIOS AND HEDGING RISK FOR GRAIN BY-PRODUCTS
2000Optimal cross hedge ratios are estimated for a number of grain by-products used as livestock feed. Risk associated with these cross hedge ratios is measured to determine if cross hedging reduces grain by-product price risk. Results provide useful risk management guidelines for livestock and dairy producers.
Coffey, Brian K. +2 more
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Hedge Ratio and Time Series Analysis
2019In this chapter, we theoretically develop alternative hedge ratio models. We then use one of the hedge ratio models and S&P index futures data to show how alternative time-series models can be used to estimate hedge ratio. Time-series models include OLS regression, ARCH model, GARCH model, etc.
Cheng-Few Lee, Hong-Yi Chen, John Lee
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2003
Hedging is an attempt to reduce the risk of adverse price changes, such as the exchange rate implicit in a spot position on a currency. Financial hedging, as we have seen, entails taking an offsetting position on another asset or a hedging instrument (say, a forward position on the same or another currency, with the latter constituting cross hedging ...
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Hedging is an attempt to reduce the risk of adverse price changes, such as the exchange rate implicit in a spot position on a currency. Financial hedging, as we have seen, entails taking an offsetting position on another asset or a hedging instrument (say, a forward position on the same or another currency, with the latter constituting cross hedging ...
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Improvement of Hedging Effect Based on the Average Hedging Ratio
2018This paper is aimed at exploring the improvement of hedging effect based on the theory of portfolio hedging, with multiple groups of CSI300 stock index futures and spot sample data as the analysis object. The minimum variance method is employed to estimate the optimal hedging ratio under the OLS and GARCH hedging models and calculate the average of the
Yang Liu, Chuan-he Shen
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Journal of Business Finance & Accounting, 1996
This paper examines hedging effectiveness for the FTSE‐100 Stock Index futures contract from 1984 to 1992. It investigates the appropriate econometric technique to use in estimating minimum variance hedge ratios by undertaking estimations using OLS, an ECM and GARCH. Simple OLS outperforms more complex econometric techniques.
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This paper examines hedging effectiveness for the FTSE‐100 Stock Index futures contract from 1984 to 1992. It investigates the appropriate econometric technique to use in estimating minimum variance hedge ratios by undertaking estimations using OLS, an ECM and GARCH. Simple OLS outperforms more complex econometric techniques.
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Is Hedging a Habit? Hedging Ratio Determination of Cotton Producers
2010We examine the role that habit plays when producers determine their hedge ratio. Data were collected from U.S. cotton growers in which they indicated their hedging position in 2001 and 2002 as well as their perceived profitability, land ownership structure, and income.
Dorfman, Jeffrey H. +5 more
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Cross and Delta-Hedges: Regression versus Price-Based Hedge Ratios
SSRN Electronic Journal, 1999In implementing a variance-minimizing cross or delta hedge, the regression coefficient is often estimated using data from the past, but one could also use estimators that are suggested by the random-walk or unbiased-expectations models and require just a single price.
Piet Sercu, Xueping Wu
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