scholarly journals Hedging effectiveness for international index futures markets

2018 ◽  
Vol 32 (1) ◽  
pp. 149-159
Author(s):  
Alexandros Koulis ◽  
George Kaimakamis ◽  
Christina Beneki
Keyword(s):  
Futures Markets ◽  
Futures Contracts ◽  
Index Futures ◽  
Distributed Lag ◽  
Autoregressive Distributed Lag ◽  
Hedging Effectiveness ◽  
Hedge Ratios ◽  
The Usa ◽  
Conventional Models ◽  
Market Indexes

Abstract This paper investigates the hedging effectiveness of the International Index Futures Markets using daily settlement prices for the period 4 January 2010 to 31 December 2015. Standard OLS regressions, Error Correction Model (ECM), as well as Autoregressive Distributed Lag (ARDL) cointegration model are employed to estimate corresponding hedge ratios that can be employed in risk management. The analyzed sample consists of daily closing market rates of the stock market indexes of the USA and the European futures contracts. The findings indicate that the time varying hedge ratios, if estimated through the ARDL model, are more efficient than the fixed hedge ratios in terms of minimizing the risk. Additionally, there is evidence that the comparative advantage of advanced econometric approaches compared to conventional models is enhanced further for capital markets within peripheral EU countries

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

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.

scholarly journals Razvijeni oblik trgovine na robnim berzama - trziste robnih fjucersa -

2003 ◽  
Vol 44 (158) ◽  
pp. 7-43 ◽  
Author(s):  
Milan Eremic
Keyword(s):  
Complex System ◽  
Futures Markets ◽  
Commodity Markets ◽  
Commodity Futures ◽  
Futures Contracts ◽  
Commodity Trade ◽  
Commodity Exchange ◽  
Commodity Futures Markets ◽  
The World ◽  
The Usa

At the very beginning of this paper, we stress the fact that capitalism, during a very long period of its emergence and development, was based on simple forms of commodity trading. It is true that capital left its mark on these simple forms. However, it did not change its simple character. Several centuries were to pass in for capital to build its own autochthonous forms of commodity exchange, the forms inherent in capitalism. The early forms of commodity futures, as the basic instrument of this developed commodity exchange, are thought to have been introduced on the Chicago Board of Trade - CBOT in 1985. The introduction of commodity futures contracts into commodity exchange enabled commodity markets to be divided into physical commodity markets and contract markets. This was the beginning of a complex system of commodity trade, the emergence of new economic entities in commodity markets and the development of a very complex system of trading, settlement and trade clearing through commodity futures contracts. The construction of this new system of commodity trade has lasted more than a century and during its gradual development a tremendous construct has been created, a market structure of extraordinary internal complexity and a solid logical design. The process of creating commodity futures market in the USA was outlined only in the early 1970s. We can say that it is an almost perfectly developed system, being today a dominant system in the world. Almost 100 percent of all commodity futures markets in the world are based on the commodity futures markets in the USA. The only exception is the London Metal Exchange, which is, although not being any less perfect, essentially different from the American exchanges.

One-Factor and Two-Factor Dynamic Hedging of Futures Contracts with Different Maturities for Emissions Allowances

2013 ◽  
Vol 380-384 ◽  
pp. 4529-4536
Author(s):  
Chang Kai ◽  
Zhen Yu
Keyword(s):  
Risk Reduction ◽  
Market Price ◽  
Futures Contracts ◽  
Effectiveness Evaluation ◽  
Time Varying ◽  
Slight Effect ◽  
Hedging Effectiveness ◽  
Hedge Ratios ◽  
Hedging Policy ◽  
Speed Change

Unexpected market information have a different speed change to market price of futures contracts with different maturities, and the paper estimates one-factor and two-factor dynamics hedge ratios and hedging effectiveness evaluation. One-factor and two-factor hedge ratios of futures contracts with different maturities for emissions allowances have time-varying trends. Compared with one-factor hedging, with an increase of span period, market participations can achieve a slight effect on risk reduction of portfolio revenues of futures contracts with different maturities by using two-factor hedge ratios, and especially two-factor hedging policy exhibits better hedging effectiveness for longer-term span period of futures contracts with different maturities for emissions allowances.

Risk Management with KOSDAQ50 Index Futures Markets

2003 ◽  
Vol 11 (2) ◽  
pp. 51-79
Author(s):  
Gyu Hyeon Mun ◽  
Jeong Hyo Hong
Keyword(s):  
Garch Model ◽  
Minimum Variance ◽  
Price Risk ◽  
Risk Minimization ◽  
Index Futures ◽  
Hedging Strategies ◽  
Hedging Effectiveness ◽  
Hedge Ratios ◽  
Sample Data ◽  
Hedging Performance

This paper studies hedging strategies that use the KOSDAQ50 index futures to hedge the price risk of the KOSDAQ50 index spot portfolio. This study uses the minimum variance hedge model and bivariate ECT-GARCH (1,1) model as hedging models, and analyzes their hedging performances. The sample period covers from January 31, 2001 to December 31, 2002. The most important findings may be summarized as follows. First, both the risk-minimization and GARCH model exhibit hedge ratios that are substantially lower than one. Hedge ratios of the risk-minimization tend to be higher than those of GARCH model. Second, for the in-sample data, hedging effectiveness of GARCH model is higher than that of the risk-minimization, while for the out-of-sample data, hedging effectiveness of the risk-minimization with constant hedge ratios is not far behind the GARCH model in its hedging performance. Third, the hedging performance of KOSDAQ50 index futures is lower than that of KOSPI200 index futures, but higher than that of KTB futures. In conclusion, in the KOSDAQ50 index market, investors are encouraged to use the simple risk-minimization model to hedge the price risk of KOSDAQ50 spot portfolios.

scholarly journals Hedging Effectiveness of Commodity Futures Contracts to Minimize Price Risk: Empirical Evidence from the Italian Field Crop Sector

Risks ◽  
2021 ◽  
Vol 9 (12) ◽  
pp. 213
Author(s):  
Carlotta Penone ◽  
Elisa Giampietri ◽  
Samuele Trestini
Keyword(s):  
Financial Markets ◽  
Futures Markets ◽  
Futures Contracts ◽  
Price Risk ◽  
Field Crop ◽  
Exchange Market ◽  
Income Risk ◽  
The North ◽  
Hedging Effectiveness ◽  
American Counterpart

Over the last years, farmers have been increasingly exposed to income risk due to the volatility of the commodities prices. Among others, hedging in futures markets (i.e., financial markets) represents an available strategy for producers to cope with income risks at farm level. To better understand the advantages of such promising tools, this paper aims at analyzing the hedging effectiveness for soybean, corn and milling wheat producers in Italy. Following the literature, three different methodologies (i.e., naïve, OLS, GARCH) are applied for the estimation of the hedge portfolio, then compared to an unhedged portfolio for assessing the income risk reduction. Findings confirm the hedging effectiveness of futures contracts for all the considered commodities, showing also that this effect increases with longer hedge horizons, and also showing better performances for the European exchange market (i.e., Euronext), compared to the North American counterpart.

A Comparison of Hedge Effectiveness and Price Discovery between TAIFEX TAIEX Index Futures and SGX MSCI Taiwan Index Futures

2002 ◽  
Vol 05 (02) ◽  
pp. 277-300 ◽  
Author(s):  
Shen-Yuan Chen ◽  
Ching-Chung Lin ◽  
Pin-Huang Chou ◽  
Dar-Yeh Hwang
Keyword(s):  
Futures Markets ◽  
Price Discovery ◽  
Spot Market ◽  
Ratio Test ◽  
Variance Ratio ◽  
Index Futures ◽  
Hedging Effectiveness ◽  
Daily Data ◽  
Relationship Of ◽  
The Bayesian Approach

This article uses daily data from July 21, 1998 to July 31, 2000 to examine the hedging effectiveness, price behavior, and lead-lag relationship of SGX MSCI Taiwan index futures and TAIFEX TAIEX futures. By applying the Bayesian approach using Gibbs sampler, we find that TAIFEX index futures has a better hedging performance. A variance ratio test reveals that mean reversion and negative correlation of returns exist in SGX index futures. Only TAIFEX TAIEX futures is cointegrated with TAIEX spot. The uni-directional Granger causality between the two futures markets and spot market are from SGX to TAIEX and from TAIEX to TAIFEX. In terms of price discovery, SGX MSCI Taiwan index futures play a more important role than TAIFEX TAIEX futures.

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