✦ LIBER ✦

The effects of structural breaks and long memory on currency hedging

✍ Scribed by Donald Lien; Li Yang

Publisher: John Wiley and Sons
Year: 2009
Tongue: English
Weight: 145 KB
Volume: 30
Category: Article
ISSN: 0270-7314
DOI: 10.1002/fut.20436

No coin nor oath required. For personal study only.

✦ Synopsis

Abstract

Empirical evidence suggests that unconditional variance of exchange rate return series is subject to occasional structural breaks that may induce spurious phenomenon of high persistence and long memory of volatility processes. In this study, we investigate the effects of such breaks on estimated risk‐minimizing hedge strategies (ratios) and their performance in currency markets. Using bivariate GARCH (BGARCH) and fractionally integrated GARCH models, we estimate the hedge ratios for six foreign currencies in the full sample with and without controlling for breaks and each subsample of different unconditional variance regimes identified by a modified version of the Inclan C, and Tiao GC (1994) algorithm. Our findings suggest that daily currency risk can be better hedged with currency futures when controlling for unconditional variance breaks in the BGARCH model. © 2009 Wiley Periodicals, Inc. Jrl Fut Mark 30:607–632, 2010

📜 SIMILAR VOLUMES

A note on the hedging effectiveness of f

A note on the hedging effectiveness of foreign currency futures

✍ Joanne Hill; Thomas Schneeweis 📂 Article 📅 1981 🏛 John Wiley and Sons 🌐 English ⚖ 328 KB 👁 2 views

T w o recent studies [Hill and Schneeweis (H&S) (forthcoming) and Dale (1981)l

The Effect of the Hedge Horizon on Optim

The Effect of the Hedge Horizon on Optimal Hedge Size and Effectiveness When Prices are Cointegrated

✍ Ted Juhl; Ira G. Kawaller; Paul D. Koch 📂 Article 📅 2011 🏛 John Wiley and Sons 🌐 English ⚖ 236 KB 👁 1 views

This study compares two alternative regression specifications for sizing hedge positions and measuring hedge effectiveness: a simple regression on price changes and an error correction model (ECM). We show that, when the prices of the hedged item and the hedging instrument are cointegrated, both spe

ChemInform Abstract: Effect of Ions on t

ChemInform Abstract: Effect of Ions on the Structure of Water: Structure Making and Breaking

✍ Yizhak Marcus 📂 Article 📅 2009 🏛 John Wiley and Sons ⚖ 15 KB 👁 1 views

False recall and false memory: the effec

False recall and false memory: the effects of instructions on memory errors

✍ Beth A. Newstead; Stephen E. Newstead 📂 Article 📅 1998 🏛 John Wiley and Sons 🌐 English ⚖ 146 KB 👁 2 views

An experiment is reported using a list-learning paradigm in which all the words have a common associate, which is known to be frequently but erroneously recalled. Four experimental conditions were used. One group was instructed to think about the meanings of the words, another to relate them to pers

The effects of caffeine and expectancy o

The effects of caffeine and expectancy on attention and memory

✍ Adam Oei; Laurence R. Hartley 📂 Article 📅 2005 🏛 John Wiley and Sons 🌐 English ⚖ 158 KB 👁 1 views

The present study contrasted caffeine's effects on individuals who expect caffeine to stimulate them and those who do not. Secondly, whether a message that caffeine rather than placebo was administered would also affect these two groups of subjects differently was investigated. The study was conduct

ARFIMA approximation and forecasting of

ARFIMA approximation and forecasting of the limiting aggregate structure of long-memory process

✍ K. S. Man; G. C. Tiao 📂 Article 📅 2009 🏛 John Wiley and Sons 🌐 English ⚖ 160 KB 👁 1 views

## Abstract This article studies Man and Tiao's (2006) low‐order autoregressive fractionally integrated moving‐average (ARFIMA) approximation to Tsai and Chan's (2005b) limiting aggregate structure of the long‐memory process. In matching the autocorrelations, we demonstrate that the approximation w