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Analysis of hedging based on co-persistence theory

  • Chang-Shuai Li

This article analyzes the relationship between co-persistence and hedging which indicates co-persistence ratio is just the long-term hedging ratio. The new method of exhaustive search algorithm for deriving co-persistence ratio is derived in the article. And we also develop a new hedging strategy of combining co-persistence with dynamic hedging which can enhance the hedging effectiveness and reduce the persistence of the hedged portfolio. Finally our strategy is illustrated to study the hedge of JIASHI300 index and HS300 stock index future .

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Paper provided by in its series Papers with number 1112.4027.

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Date of creation: Dec 2011
Date of revision: Feb 2012
Handle: RePEc:arx:papers:1112.4027
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