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Pricing and Hedging Copper Futures on the London Metal Exchange

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  • Souha Boutouria
  • Fathi Abid

Abstract

The purpose of this paper is to examine the behavior of copper spot prices in London Metal Exchange. Besides, we examine the relation between hedging effectiveness and the maturity of the contract. This research provides an empirical comparison of different econometric techniques in the context of hedging the market risk of copper traded on the London Metal Exchange. It is found that the VAR-MGARCH model estimates of time-varying hedge ratio provide highest variance reduction.

Suggested Citation

  • Souha Boutouria & Fathi Abid, 2012. "Pricing and Hedging Copper Futures on the London Metal Exchange," The IUP Journal of Applied Finance, IUP Publications, vol. 18(1), pages 68-98, January.
    • Handle: RePEc:icf:icfjaf:v:18:y:2012:i:1:p:68-98
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