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Hedging Ratios (hedging + ratio)

Distribution by Scientific Domains
Business, Economics, Finance and Accounting100%

Selected Abstracts

Optimal Hedging Ratios for Wheat and Barley at the LIFFE: A GARCH Approach

JOURNAL OF AGRICULTURAL ECONOMICS, Issue 2 2000
P. J. Dawson
Over 100,000 futures contracts for cereals are traded annually on the London International Financial Futures Exchange. The proportion of the spot position held as futures contracts - the hedging ratio - is critical to traders and traditional estimates, using OLS, are constant over time. In this paper, we estimate time-varying hedging ratios for wheat and barley contracts using a multivariate generalised autoregressive conditional heteroscedasticity (GARCH) model. Results indicate that GARCH hedging ratios do change through time. Moreover, risk using the GARCH hedge is reduced significantly by around 4 per cent for wheat and 2 per cent for barley relative to the no hedge position, and significantly by around 0.2 per cent relative to the constant hedge. The optimal, expected utility-maximising, and the risk-minimising hedging ratios are equivalent. [source]

Hedging foreign currency, freight, and commodity futures portfolios,A note

THE JOURNAL OF FUTURES MARKETS, Issue 12 2002
Michael S. Haigh
Foreign exchange hedging ratios are simultaneously estimated alongside freight and commodity ratios in a time-varying portfolio framework. Foreign exchange futures are by far the most important derivative instrument used to reduce uncertainty for traders. Our results lend support to the decision by the London International Financial Futures Exchange to cease trading the Baltic International Freight Futures Exchange freight futures contract because of its low levels of trading activity that likely resulted from its apparent unattractiveness as a hedging instrument. @ 2002 Wiley Periodicals, Inc. Jrl Fut Mark 22:1205,1221, 2002 [source]