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Hedging crude oil using refined product: A regime switching asymmetric DCC approach

Listed author(s):
  • Pan, Zhiyuan
  • Wang, Yudong
  • Yang, Li
Registered author(s):

In this paper, we explore the strategy on hedging crude oil using refined product. We develop a regime switching asymmetric DCC (RS-ADCC) model by taking into account both of regime switching and asymmetry in correlations. Our out-of-sample findings indicate that RS-ADCC displays greater hedging effectiveness than some conventional multivariate GARCH. Heating oil can better hedge crude oil than gasoline.

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File URL: http://www.sciencedirect.com/science/article/pii/S0140988314001224
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Article provided by Elsevier in its journal Energy Economics.

Volume (Year): 46 (2014)
Issue (Month): C ()
Pages: 472-484

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Handle: RePEc:eee:eneeco:v:46:y:2014:i:c:p:472-484
DOI: 10.1016/j.eneco.2014.05.014
Contact details of provider: Web page: http://www.elsevier.com/locate/eneco

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