Event Diary
CRiSM Seminar
Location: A1.01
Jonathan Dark, University of Melbourne
Dynamic hedging with futures that are subject to price limits
The standard approaches to estimating minimum variance hedge ratios (MVHRs) are mis-specified when futures prices are subject to price limits. This paper proposes a bivariate tobit-FIGARCH model with maturity effects to estimate dynamic MVHRs using single and multiple period approaches. Simulations and an application to a commodity futures hedge support the proposed approach and highlight the importance of allowing for price limits when hedging.
Dynamic hedging with futures that are subject to price limits
The standard approaches to estimating minimum variance hedge ratios (MVHRs) are mis-specified when futures prices are subject to price limits. This paper proposes a bivariate tobit-FIGARCH model with maturity effects to estimate dynamic MVHRs using single and multiple period approaches. Simulations and an application to a commodity futures hedge support the proposed approach and highlight the importance of allowing for price limits when hedging.