Futures Maturity and Hedging Effectiveness - The Case of Oil Futures
This paper examines the effect of the maturity of the futures contact used as the hedging instrument on the effectiveness of futures hedging. For this purpose, daily and monthly data on the WTI crude oil futures and spot prices are used to work out the hedge ratios and the measures of hedging effectiveness resulting from using the near-month contract and those resulting from the use of a more distant (six-month) contract. The results show that futures hedging is more effective when the near-month contract is used. They also reveal that hedge ratios are lower for near-month hedging. Some explanations are presented for these findings.
|Date of creation:||Nov 2005|
|Date of revision:|
|Contact details of provider:|| Postal: Sydney NSW 2109|
Web page: http://www.econ.mq.edu.au/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:mac:wpaper:0513. 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: (Helen Boneham)
If references are entirely missing, you can add them using this form.