Market volatility and the dynamic hedging of multi-commodity price risk

Autor:	Dmitry V. Vedenov, Gabriel J. Power, David P. Anderson, Steven L. Klose
Rok vydání:	2013
Předmět:	Economics and Econometrics Stylized fact Heteroscedasticity business.industry Financial economics media_common.quotation_subject Copula (probability theory) Replicating portfolio Cash Economics Volatility (finance) business Futures contract Risk management media_common
Zdroj:	Applied Economics. 45:3891-3903
ISSN:	1466-4283 0003-6846
Popis:	Commodity cash and futures prices experienced a severe boom-and-bust cycle between 2006 and 2009. Increases in commodity price volatility have raised concerns about the usefulness of commodity futures and options as risk management tools. Dynamic hedging strategies have the potential to improve risk management when conditional (co)variances depart significantly from their unconditional, long-run counterparts and may be useful to decision-makers despite their greater complexity and higher transaction costs. We propose a Nonparametric Copula-based Generalized Autoregressive Conditional Heteroscedastic (NPC-GARCH) approach to estimate time-varying hedge ratios, and evaluate the benefits of dynamic hedging during four sub-periods between 2000 and 2011 using a stylized Texas cattle feedlot management problem. The NPC-GARCH approach allows for a flexible, nonlinear and asymmetric dependence structure between cash and futures prices for different commodities. We find that NPC-GARCH dynamic hedging performs bette...
Databáze:	OpenAIRE
Externí odkaz:	https://explore.openaire.eu/search/publication?articleId=doi_________::56ef16dff310b8f7810c174dda36210a https://doi.org/10.1080/00036846.2012.736942 Zobrazit plný text záznamu Plný text ve formátu PDF Plný text ve formátu HTML
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