The risk management effectiveness of multivariate hedging models in the U.S. soy complex
✍ Scribed by Collins, Robert A.
- Publisher
- John Wiley and Sons
- Year
- 2000
- Tongue
- English
- Weight
- 184 KB
- Volume
- 20
- Category
- Article
- ISSN
- 0270-7314
No coin nor oath required. For personal study only.
✦ Synopsis
Several authors have proposed sophisticated multivariate hedging strategies which use portfolio theory and complex econometric techniques. Practical application of these techniques requires using historical data to make decisions about future hedging portfolios. This paper tests to see if there is enough stationarity in the data for these models to actually provide better hedging strategies in practice. For the soy complex the results are clear. No statistically significant improvement over naive equal and opposite hedges was found for any of the multivariate hedging models. So far, there is no known evidence that any of these methods perform reliably in practice.