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Short Term Hedging Using Futures Contracts

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  • Maria CARACOTA DIMITRIU

    ()
    (The Bucharest University of Economic Studies, Romania)

  • Ioana – Diana PAUN

    ()
    (The Bucharest University of Economic Studies, Romania)

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    Abstract

    The objective of this paper is to demonstrate the effectiveness of risk management portfolio using futures contracts to achieve hedging. The risk can be minimized once measured, and the traditional tool of market risk management is hedging. The objective is to identify the optimum position to minimize the variation in a contract concluded now. Clearly hedging portfolio will reduce not only risk but also profitability. In conclusion hedging aims risk management, no additional gain. Portfolio manager will have the opportunity to carefully consider the relationship between risk and return in order to act according to his profile and targeted results.

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    Bibliographic Info

    Article provided by Faculty of Management, Academy of Economic Studies, Bucharest, Romania in its journal ECONOMIA seria MANAGEMENT / ECONOMY - MANAGEMENT series.

    Volume (Year): 15 (2012)
    Issue (Month): 2 (December)
    Pages: 436-445

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    Handle: RePEc:rom:econmn:v:15:y:2012:i:2:p:436-445

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    Related research

    Keywords: Futures contracts; derivatives; hedging; OLS.;

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    1. Darren Butterworth & Phil Holmes, 2000. ""Ex Ante" Hedging Effectiveness of UK Stock Index Futures Contracts: Evidence for the FTSE 100 and FTSE Mid 250 Contracts," European Financial Management, European Financial Management Association, vol. 6(4), pages 441-457.
    2. Chang, Jack S. K. & Shanker, Latha, 1987. "A Risk-Return Measure of Hedging Effectiveness: A Comment," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 22(03), pages 373-376, September.
    3. Anil K. Bera & Philip Garcia & Jae-Sun Roh, 1997. "Estimation of Time-Varying Hedge Ratios for Corn and Soybeans: BGARCH and Random Coefficient Approaches," Finance 9712007, EconWPA.
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