Textbook Estimators of Multiperiod Optimal Hedging Ratios: Methodological Aspects and Application to the European Wheat Market
AbstractThis work deals with methodological and empirical issues related to multiperiod optimal hedging OLS estimators. We propose an analytical formula for the multiperiod minimum variance hedging ratio starting from the triangular representation of a cointegrated system DGP. Since estimating the hedge ratio matching the frequency of data with the hedging horizon leads to a sample size reduction problem, we carry out a Monte Carlo study to investigate the pattern and hedging efficiency of OLS hedging ratio based on overlapping vs non-overlapping observations exploring a range of hedging horizons and sample sizes. Finally, we applied our approach to real data for a cross hedging related to soft wheat.
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Bibliographic InfoPaper provided by Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa in its series Working Papers - Economics with number wp2013_29.rdf.
Length: 25 pages
Date of creation: 2013
Date of revision:
Future prices; Hedging; Monte Carlo; Soft wheat;
Find related papers by JEL classification:
- C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
- G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
This paper has been announced in the following NEP Reports:
- NEP-ALL-2014-02-02 (All new papers)
- NEP-ECM-2014-02-02 (Econometrics)
- NEP-RMG-2014-02-02 (Risk Management)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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2013 Second Congress, June 6-7, 2013, Parma, Italy
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