The extended Gini coefficient, C, is a measure of dispersion with strong theoretical merit for use in futures hedging. Yitzhaki (1982Yitzhaki ( , 1983) ) provides conditions under which a two-parameter framework using the mean and C of portfolio returns yields an efficient set consistent with second
A note on estimating the benefit of a composite hedge
β Scribed by Donald Lien
- Publisher
- John Wiley and Sons
- Year
- 2008
- Tongue
- English
- Weight
- 80 KB
- Volume
- 28
- Category
- Article
- ISSN
- 0270-7314
No coin nor oath required. For personal study only.
π SIMILAR VOLUMES
The conventional approach applies an estimated optimal hedge ratio to evaluate and compare hedging performance. This note shows that the approach produces a biased result. Moreover, it tends to underestimate the true hedging performance.
## Abstract Suppose that there is an information variable (with error correction variable being a special case) affecting the spot price but not the futures price. The estimated optimal hedge ratio is unbiased but inefficient when this variable is omitted. In addition, the resulting hedging effecti
Suppose that spot and futures prices are generated from an errorcorrection model. This note demonstrates that, although the OLS model is misspecified, it provides a hedge ratio that usually outperforms the hedge ratio derived from the correct error-correction model. The opposite result is possible o
## Abstract We characterize conditions under which the regime switching (RS) hedge strategy will perform better than the ordinary least squares (OLS) hedge strategy. The result can be extended to the case where the GARCH effects prevail. Specifically, these conditions would allow the RSβGARCH hedge
## Abstract An option hedge ratio is the sensitivity of an option price with respect to price changes in the underlying stock. It measures the number of shares of stocks to hedge an option position. This article presents a simple derivation of the hedge ratios under the BlackβScholes optionβpricing