Advanced Search
MyIDEAS: Login

Basis convergence and long memory in volatility when dynamic hedging with SPI futures

Contents:

Author Info

  • Jonathan Dark

    ()

Registered author(s):

    Abstract

    This paper examines the importance of basis convergence and long memory in volatility when estimating minimum variance hedge ratios (MVHRs) using SPI futures. The paper employs a bivariate FIGARCH model with a maturity effect to model the joint dynamics of the Australian All Ordinaries Index and the basis. This new approach allows for long memory in volatility, time varying correlations and the convergence between the All Ordinaries Index and its SPI futures over the life of the futures contract. The results illustrate the importance of these effects when modelling the joint dynamics and when estimating dynamic MVHRs.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.buseco.monash.edu.au/ebs/pubs/wpapers/2004/wp6-04.pdf
    Download Restriction: no

    Bibliographic Info

    Paper provided by Monash University, Department of Econometrics and Business Statistics in its series Monash Econometrics and Business Statistics Working Papers with number 6/04.

    as in new window
    Length: 40 pages
    Date of creation: Mar 2004
    Date of revision:
    Handle: RePEc:msh:ebswps:2004-6

    Contact details of provider:
    Postal: PO Box 11E, Monash University, Victoria 3800, Australia
    Phone: +61-3-9905-2489
    Fax: +61-3-9905-5474
    Email:
    Web page: http://www.buseco.monash.edu.au/depts/ebs/
    More information through EDIRC

    Order Information:
    Email:
    Web: http://www.buseco.monash.edu.au/depts/ebs/pubs/wpapers/

    Related research

    Keywords: basis convergence; long memory; bivariates FIGARCH; dynamic minimum variance hedge ratios.;

    Find related papers by JEL classification:

    This paper has been announced in the following NEP Reports:

    References

    References listed on IDEAS
    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.:
    as in new window
    1. Denis Kwiatkowski & Peter C.B. Phillips & Peter Schmidt, 1991. "Testing the Null Hypothesis of Stationarity Against the Alternative of a Unit Root: How Sure Are We That Economic Time Series Have a Unit Root?," Cowles Foundation Discussion Papers 979, Cowles Foundation for Research in Economics, Yale University.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:msh:ebswps:2004-6. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Simone Grose).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.