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- Publisher Website: 10.1016/j.qref.2005.07.003
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Article: A semiparametric estimation of the optimal hedge ratio
Title | A semiparametric estimation of the optimal hedge ratio |
---|---|
Authors | |
Keywords | Commodities Futures Hedging Nonparametric Seasonal |
Issue Date | 2007 |
Publisher | Elsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/qref |
Citation | Quarterly Review Of Economics And Finance, 2007, v. 47 n. 2, p. 366-381 How to Cite? |
Abstract | Standard static hedging models employing futures contracts yield poor results for most commodities, especially when compared with the evidence for financial instruments such as stock indexes and currencies. Moreover, the efforts in the dynamic hedging of commodity prices via GARCH models have found limited success. In this paper, we propose an alternate approach for constructing the 'optimal' hedge ratio. The approach differs from previous methods in two respects. First, we incorporate controls for seasonals, time to maturity, inventories, and futures term-structure in the construction of hedge ratio. Second, we adopt a partially linear functional form for the hedge ratio. Employing data from the U.S. markets for corn, cotton, and soybeans, we find that our method substantially outperforms the static, semi-dynamic, and GARCH models. © 2007 Board of Trustees of the University of Illinois. |
Persistent Identifier | http://hdl.handle.net/10722/177743 |
ISSN | 2023 Impact Factor: 2.9 2023 SCImago Journal Rankings: 0.662 |
ISI Accession Number ID | |
References |
DC Field | Value | Language |
---|---|---|
dc.contributor.author | Ai, C | en_US |
dc.contributor.author | Chatrath, A | en_US |
dc.contributor.author | Song, F | en_US |
dc.date.accessioned | 2012-12-19T09:39:46Z | - |
dc.date.available | 2012-12-19T09:39:46Z | - |
dc.date.issued | 2007 | en_US |
dc.identifier.citation | Quarterly Review Of Economics And Finance, 2007, v. 47 n. 2, p. 366-381 | en_US |
dc.identifier.issn | 1062-9769 | en_US |
dc.identifier.uri | http://hdl.handle.net/10722/177743 | - |
dc.description.abstract | Standard static hedging models employing futures contracts yield poor results for most commodities, especially when compared with the evidence for financial instruments such as stock indexes and currencies. Moreover, the efforts in the dynamic hedging of commodity prices via GARCH models have found limited success. In this paper, we propose an alternate approach for constructing the 'optimal' hedge ratio. The approach differs from previous methods in two respects. First, we incorporate controls for seasonals, time to maturity, inventories, and futures term-structure in the construction of hedge ratio. Second, we adopt a partially linear functional form for the hedge ratio. Employing data from the U.S. markets for corn, cotton, and soybeans, we find that our method substantially outperforms the static, semi-dynamic, and GARCH models. © 2007 Board of Trustees of the University of Illinois. | en_US |
dc.language | eng | en_US |
dc.publisher | Elsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/qref | en_US |
dc.relation.ispartof | Quarterly Review of Economics and Finance | en_US |
dc.rights | The Quarterly Review of Economics and Finance. Copyright © Elsevier BV. | - |
dc.subject | Commodities | en_US |
dc.subject | Futures | en_US |
dc.subject | Hedging | en_US |
dc.subject | Nonparametric | en_US |
dc.subject | Seasonal | en_US |
dc.title | A semiparametric estimation of the optimal hedge ratio | en_US |
dc.type | Article | en_US |
dc.identifier.email | Song, F: fmsong@hkucc.hku.hk | en_US |
dc.identifier.authority | Song, F=rp01095 | en_US |
dc.description.nature | link_to_subscribed_fulltext | en_US |
dc.identifier.doi | 10.1016/j.qref.2005.07.003 | en_US |
dc.identifier.scopus | eid_2-s2.0-34247602155 | en_US |
dc.identifier.hkuros | 129754 | - |
dc.relation.references | http://www.scopus.com/mlt/select.url?eid=2-s2.0-34247602155&selection=ref&src=s&origin=recordpage | en_US |
dc.identifier.volume | 47 | en_US |
dc.identifier.issue | 2 | en_US |
dc.identifier.spage | 366 | en_US |
dc.identifier.epage | 381 | en_US |
dc.identifier.isi | WOS:000437601600011 | - |
dc.publisher.place | Netherlands | en_US |
dc.identifier.scopusauthorid | Ai, C=7003770272 | en_US |
dc.identifier.scopusauthorid | Chatrath, A=6701310668 | en_US |
dc.identifier.scopusauthorid | Song, F=7203075605 | en_US |
dc.identifier.issnl | 1062-9769 | - |