The hedging performance of the new futures markets PDF Download

Author: Sydney Smith Hicks
Publisher:
ISBN:
Category : Hedging (Finance)
Languages : en
Pages : 14

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Author: Louis H. Ederington
Publisher:
ISBN:
Category :
Languages : en
Pages : 14

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Author: Su Dai
Publisher: GRIN Verlag
ISBN: 3656539219
Category : Business & Economics
Languages : en
Pages : 80

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Book Description
Master's Thesis from the year 2013 in the subject Business economics - Banking, Stock Exchanges, Insurance, Accounting, grade: 1,7, University of Mannheim, language: English, abstract: The commodity futures contract is an agreement to deliver a specific amount of commodity at a future time . There are usually choices of deliverable grades, delivery locations and delivery dates. Hedging belongs to one of the fundamental functions of futures market. Futures can be used to help producers and buyers protect themselves from price risk arising from many factors. For instance, in crude oil commodities, price risk occurs due to disrupted oil supply as a consequence of political issues, increasing of demand in emerging markets, turnaround in energy policy from the fossil fuel to the solar and efficient energy, etc. By hedging with futures, producers and users can set the prices they will receive or pay within a fixed range. A hedger takes a short position if he/she sells futures contracts while owning the underlying commodity to be delivered; a long position if he/she purchases futures contracts. The commonly known basis is defined as the difference between the futures and spot prices, which is mostly time-varying and mean-reverting. Due to such basis risk, a naïve hedging (equal and opposite) is unlikely to be effective. With the popularity of commodity futures, how to determine and implement the optimal hedging strategy has become an important issue in the field of risk management. Hedging strategies have been intensively studied since the 1960s. One of the most popular approaches to hedging is to quantify risk as variance, known as minimum-variance (MV) hedging. This hedging strategy is based on Markowitz portfolio theory, resting on the result that “a weighted portfolio of two assets will have a variance lower than the weighted average variance of the two individual assets, as long as the two assets are not perfectly and positively correlated.” MV strategy is quite well accepted, however, it ignores the expected return of the hedged portfolio and the risk preference of investors. Other hedging models with different objective functions have been studied intensively in hedging literature. Due to the conceptual simplicity, the value at risk (VaR) and conditional value at risk (C)VaR have been adopted as the hedging risk objective function. [...]

Author: Manolis G. Kavussanos
Publisher:
ISBN:
Category :
Languages : en
Pages :

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Book Description
This paper examines the hedging effectiveness of the FTSE/ATHES-20 and FTSE/ATHEX Mid-40 stock index futures contracts in the relatively new and fairly unresearched futures market of Greece. Both in sample and out of sample hedging performances using weekly and daily data are examined, considering both constant and time varying hedge ratios. Results indicate that time varying hedging strategies provide minimal incremental risk-reduction benefits in sample, but under-perform simple constant hedging strategies out of sample. Moreover, futures contracts serve effectively their risk management role and compare favorably with results in order international stock index futures markets. Estimation of investor results, in terms of model selection. For the FTSE/ATHEX Mid-40 contracts we identify the existence of speculative components, which lead to utility maximizing hedge ratios, which are lower than minimum variance hedge rations.

Author: Anthony Saunders
Publisher:
ISBN:
Category : European currency unit
Languages : en
Pages : 42

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Book Description

Author: Myron S. Scholes
Publisher:
ISBN:
Category : Commodity exchanges
Languages : en
Pages : 48

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Book Description

Author: James A. Overdahl
Publisher:
ISBN:
Category : Certificates of deposit
Languages : en
Pages : 60

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Book Description

Author: Panayotis N. Varangis
Publisher: World Bank Publications
ISBN:
Category : Algodon - Precios
Languages : en
Pages : 34

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Book Description
New York cotton futures and options contracts provide an effective way to reduce cotton price volatility, despite relatively high basis risk.

Author: Thomas O. Meyer
Publisher:
ISBN:
Category : Futures market
Languages : en
Pages : 96

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Book Description

Author: Slobodan Jovanovic
Publisher: Harriman House Limited
ISBN: 0857193295
Category : Business & Economics
Languages : en
Pages : 454

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Book Description
This book is an invaluable resource of hedging case studies and examples, explaining with clarity and coherence how various instruments - such as futures and options - are used in different market scenarios to contain, control and eliminate price risk exposure. Its core objective is to elucidate hedging transactions and provide a systematic, comprehensive view on hedge performance. When it comes to hedge strategies specifically, great effort has been employed to create new instruments and concepts that will prove to be superior to classic methods and interpretations. The concept of hedge patterns - introduced here - proves it is possible to tabulate a hedging strategy and interpret its use with diagrams, so each example is shown visually with the result of radical clarity. A compelling visual pattern is also attached to each case study to give you the ability to compare different solutions and apply a best-fit hedging strategy in real-world situations. A diverse range of hedging transactions showing the ultimate payoff profiles and performance metrics are included. These have been designed to achieve the ultimate goal - to convey the necessary skills to allow business and risk management teams to develop proper hedging mechanisms and apply them in practice.