Portfolio model hedging with canadian dollar futures: A framework for analysis

✍ Scribed by Harry S. Marmer

• Publisher: John Wiley and Sons
• Year: 1986
• Tongue: English
• Weight: 560 KB
• Volume: 6
• Category: Article
• ISSN: 0270-7314
• DOI: 10.1002/fut.3990060108

✦ Synopsis

However, no one has examined these three issues together with respect to one specific futures contract.

From the perspective of a hedger, all three topics are highly integrated and quite important in deciding how to set up an effective hedge. A hedger considering the use of the portfolio model is confronted with several practical problems arising from these issues. What degree of hedging effectiveness can be expected from the futures market? Are the optimal hedge ratios stable over time? How well will the optimal hedge ratio strategy perform relative to not hedging or,a naive hedge? The purpose of this article is to integrate these three issues into one study on the Canadian Dollar futures in order to provide hedgers with a framework of analysis for using the portfolio model to structure hedges.

This article is divided into four sections. Section I presents the rationale behind a framework of analysis for hedgers desiring to use the portfolio model to structure hedges. Section I1 presents the data and statistical methodology used in this study. Section I11 displays the empirical results of applying a framework of analysis for using the portfolio model. Finally, Section IV provides a summary of this study and conclusions for future research efforts.