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Optimal Futures (optimal + future)

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

Selected Abstracts

The incremental value of a futures hedge using realized volatility

THE JOURNAL OF FUTURES MARKETS, Issue 9 2010
Yu-Sheng Lai
A number of prior studies have developed a variety of multivariate volatility models to describe the joint distribution of spot and futures, and have applied the results to form the optimal futures hedge. In this study, the authors propose a new class of multivariate volatility models encompassing realized volatility (RV) estimates to estimate the risk-minimizing hedge ratio, and compare the hedging performance of the proposed models with those generated by return-based models. In an out-of-sample context with a daily rebalancing approach, based on an extensive set of statistical and economic performance measures, the empirical results show that improvement can be substantial when switching from daily to intraday. This essentially comes from the advantage that the intraday-based RV potentially can provide more accurate daily covariance matrix estimates than RV utilizing daily prices. Finally, this study also analyzes the effect of hedge horizon on hedge ratio and hedging effectiveness for both the in-sample and the out-of-sample data. © 2009 Wiley Periodicals, Inc. Jrl Fut Mark 30:874,896, 2010 [source]

A copula-based regime-switching GARCH model for optimal futures hedging

THE JOURNAL OF FUTURES MARKETS, Issue 10 2009
Hsiang-Tai LeeArticle first published online: 27 JUL 200
The article develops a regime-switching Gumbel,Clayton (RSGC) copula GARCH model for optimal futures hedging. There are three major contributions of RSGC. First, the dependence of spot and futures return series in RSGC is modeled using switching copula instead of assuming bivariate normality. Second, RSGC adopts an independent switching Generalized Autoregressive Conditional Heteroscedasticity (GARCH) process to avoid the path-dependency problem. Third, based on the assumption of independent switching, a formula is derived for calculating the minimum variance hedge ratio. Empirical investigation in agricultural commodity markets reveals that RSGC provides good out-of-sample hedging effectiveness, illustrating importance of modeling regime shift and asymmetric dependence for futures hedging. © 2009 Wiley Periodicals, Inc. Jrl Fut Mark 29:946,972, 2009 [source]

Developing Hedging Strategies for Québec Hog Producers under Revenue Insurance

CANADIAN JOURNAL OF AGRICULTURAL ECONOMICS, Issue 1 2004
Jean-Philippe Gervais
The paper investigates the optimal hedging strategies of Québec hog producers when they participate in a publicly funded revenue insurance program known as ASRA (Régime d'assurance-stabilisation des revenus agricoles). A forecast model of local cash and futures prices is built and Monte Carlo methods are used to derive the optimal futures and option positions of Québec hog producers. The positive correlation between forecasts of futures and cash spot prices induces positive sales of futures and put options to hedge price risk. ASRA provides put options to hog producers at actuarially advantageous terms. Producers can increase the expected utility of profits by selling back a portion of these put options using financial markets. Options are attractive to manage price risk given the nonlinearity in the profit function induced by the revenue insurance scheme. Speculative incentives to use futures and options are also discussed in the context of ASRA. Les auteurs ont examiné les meilleures stratégies de régulation pour les producteurs de porc québécois adhérant au programme d'assurance-revenu financeé par l'administration publique (ASRA). Ils ont bâti un modéle de prévision pour les prix au comptant et les prix à terme locaux puis appliquéé les méthodes de Monte Carlo pour voir comment les éleveurs de porcs québécois peuvent obtenir les prix d'option etles prix â terme optimaux. La corrélation positive entre les prix é terme et les prix au comptant favorise les ventes â terme et les options de vente pour une meilleure régulation des risques associés aux prix. L'ASRA permet aux producteurs de prendre des options â des termes avantageux sur le plan actuariel. Les éleveurs peuvent accroître la valeur prévue de leurs bénéfices en cédant une partie de ces options sur les marchés financiers. Les options sont intéressantes pour gérer les risques liés aux prix â cause de la non-linéarité que le programme d'assurance-revenu induit dans la fonction «bénéfices ». Les auteurs abordent aussi le probléme de la spéculation sur le marchéâ terme et le marché des options dans le contexte de l'ASRA. [source]