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Hedging Oil Prices with Renewable Energy Indices A Comparison between Various Multivariate Garch Versions

Author

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  • Asma Abdallah

    (Department of Quantitative Methods, CODESI Laboratory, Tunisia)

  • Ahmed Ghorbela

    (Department of Quantitative Methods, CODESI Laboratory, Tunisia)

Abstract

Increasing greenhouse gas emissions, rising and exhaustibility oil prices has accumulated the importance of looking for alternative energy sources. In this work, our objective is to study in a first step the link and interactions between oil market and the renewable energy stock market in terms of volatility, then in a second step to determine the best hedging strategy in the oil market by the renewable energy indices. Our methodology consists to estimate the volatility of the variation of oil prices on the renewable energy indices as well as the coefficient of correlation based on a multivariate GARCH model. Several versions of this model are used to calculate the variances as well as the conditional correlations to calculate the hedging ratio and then determinate the best hedging strategy.

Suggested Citation

  • Asma Abdallah & Ahmed Ghorbela, 2018. "Hedging Oil Prices with Renewable Energy Indices A Comparison between Various Multivariate Garch Versions," Biostatistics and Biometrics Open Access Journal, Juniper Publishers Inc., vol. 6(3), pages 74-86, April.
    • Handle: RePEc:adp:jbboaj:v:6:y:2018:i:3:p:74-86
    DOI: 10.19080/BBOAJ.2018.06.555687
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    References listed on IDEAS

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    1. Asl, Mahdi Ghaemi & Canarella, Giorgio & Miller, Stephen M., 2021. "Dynamic asymmetric optimal portfolio allocation between energy stocks and energy commodities: Evidence from clean energy and oil and gas companies," Resources Policy, Elsevier, vol. 71(C).

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