## Abstract Foreign exchange hedging ratios are simultaneously estimated alongside freight and commodity ratios in a timeβvarying portfolio framework. Foreign exchange futures are by far the most important derivative instrument used to reduce uncertainty for traders. Our results lend support to the
A note on hedging performance and portfolio effects
β Scribed by Da-Hsiang Donald Lien
- Publisher
- John Wiley and Sons
- Year
- 1990
- Tongue
- English
- Weight
- 229 KB
- Volume
- 10
- Category
- Article
- ISSN
- 0270-7314
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## Abstract This note provides an analysis to examine the conjecture about the monotonic relationship between hedge ratio variability and hedging performance. Specific conditions are characterized to sustain the conjecture. Β© 2010 Wiley Periodicals, Inc. Jrl Fut Mark
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 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
In a recent paper, Kuo and Chen (1995) propose a simplification of the Howard and D'Antonio (1984, 1987) model of hedging effectiveness. This note extends Kuo-Chen's suggested simplification to derive the optimal hedge ratio and second order conditions (SOCs) of the Howard-D'Antonio model. These SOC
## Abstract This note examines the effect of loss aversion on the futures trading behavior of a short hedger. Using a modified constantβabsoluteβriskβaversion utility function, I show that loss aversion has no effect in an unbiased futures market. It has different, predictable impacts when the futu