Futures and alternative hedge ratio methodologies (Spring 1986)

The major objective of the study is to examine the performance of optimal hedge ratio and hedging effectiveness in stock futures market in National Stock Exchange, India by estimating the following econometric models like Ordinary Least Square (OLS), Vector Error Correction Model (VECM) and time varying Multivariate Generalized Autoregressive Conditional Heteroscedasticity (MGARCH) model by evaluating in sample observation and out of sample observations for the period spanning from 1st January 2011 till 31st March 2018 by accommodating sixteen stock futures retrieved through www.nseindia.com by considering banking sector of Indian economy. The findings of the study indicate both the in sample and out of sample hedging performances suggest the various strategies obtained through the time varying optimal hedge ratio, which minimizes the conditional variance performs better than the employed alterative models for most of the underlying stock futures contracts in select banking sectors in India. Moreover, the study also envisage about the model selection criteria is most important for appropriate hedge ratio through risk averse investors. Finally, the research work is also in line with the previous attempts Myers (1991), Baillie and Myers (1991) and Park and Switzer (1995a, 1995b) made in the US markets

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An Optimal Hedge Ratio Discussion - One Size Does Not Fit All

SSRN Electronic Journal ◽

10.2139/ssrn.1532457 ◽

2009 ◽

Author(s):

C. Shane Schurter

Keyword(s):

Hedge Ratio ◽

Optimal Hedge

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Estimating Optimal Hedge Ratio and Hedge Effectiveness Via Fitting the Multivariate Skewed Distributions

SSRN Electronic Journal ◽

10.2139/ssrn.1928297 ◽

2012 ◽

Author(s):

Wei-Han Liu

Keyword(s):

Skewed Distributions ◽

Hedge Ratio ◽

Optimal Hedge

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A Note on Minimum Riskiness Hedge Ratio

SSRN Electronic Journal ◽

10.2139/ssrn.2481745 ◽

2014 ◽

Author(s):

Sina Ehsani ◽

Donald Lien

Keyword(s):

Hedge Ratio

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Effectiveness of Time-Varying Hedge Ratio with Constant Conditional Correlation: Empirical Evidence from U.S. Treasury Market

SSRN Electronic Journal ◽

10.2139/ssrn.920977 ◽

2006 ◽

Author(s):

Sheraz Ahmed

Keyword(s):

Empirical Evidence ◽

Time Varying ◽

Conditional Correlation ◽

Hedge Ratio ◽

Treasury Market

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Examining the Hedging Effectiveness of Futures Contracts over Pre and Post Financial Crisis Period: Evidence from National Stock Exchange of India

International Journal of Banking Risk and Insurance ◽

10.21863/ijbri/2015.3.2.008 ◽

2015 ◽

Vol 3 (2) ◽

Author(s):

Kapil Gupta ◽

Mandeep Kaur

Keyword(s):

Financial Crisis ◽

Stock Exchange ◽

Futures Contracts ◽

Price Risk ◽

Hedge Ratio ◽

Crisis Period ◽

Hedging Effectiveness ◽

Hedge Ratios ◽

Time Invariant

Present study examines the efficiency of futures contracts in hedging unwanted price risk over highly volatile period i.e. June 2000 - December 2007 and January 2008 – June 2014, pre and post-financial crisis period, by using S&PC NXNIFTY, CNXIT and BANKNIFTY for near month futures contracts. The hedge ratios have been estimated by using five methods namely Ederingtons Model, ARMA-OLS, GARCH (p,q), EGARCH (p,q) and TGARCH (p,q). The study finds that hedging effectiveness increased during post crisis period for S&PC NXNIFTY and BANKNIFTY. However, for CNXIT hedging effectiveness was better during pre-crisis period than post crisis. The study also finds that time-invariant hedge ratio is more efficient than time-variant hedge ratio.

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