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ASME Press Select Proceedings

International Conference on Information Technology and Management Engineering (ITME 2011)

Editor
W. B. Hu
W. B. Hu
Wuhan University
,
China
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W. X. Wang
W. X. Wang
Royal Institute of Technology
,
Sweden
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ISBN:
9780791859827
No. of Pages:
500
Publisher:
ASME Press
Publication date:
2011

The optimal hedge ratio depends on the particular objective function to be optimized. In this article, we apply four approaches—minimum-variance, maximum-sharp ratio, HKL meanvariance utility function and minimum-VaR—as objective function for hedgers to derive optimal hedge ratio. The bivariate constant correlation GARCH model is applied to estimate the withinsample optimal hedge ratios. The hedging performance of these four hedge ratios is evaluated by portfolio coefficient of variation. The empirical results indicates that the martingale process do not hold for china' copper futures and the variances of hedge ratio display a tendency to increase as the risk-averse level decrease. As for...

Abstract
Keywords
Introduction
Model Specification
Estimation of the Optimal Hedge Ratios
Comparisons of Hedging Performance
Concluding Remarks
Acknowledgments
References
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