Optimal Risk Measures and Their Hedging Effectiveness

• Main Authors: Chang, Wen-Han, 張文翰
• Other Authors: Chiou, Jong-Rong
• Format: Others
• Language: zh-TW
• Published: 2003
• Online Access: http://ndltd.ncl.edu.tw/handle/63946548756641100785

碩士 === 淡江大學 === 財務金融學系 === 91 === There are many downside risk measures proposed in the literatures, such as variance, lower partial moment（LPM）, Value-at-risk（VaR） and expected shortfall（ES）. Each of these risk measures has its own appealing as well as disadvantages. The difference of hedging strategies using these risk measures is an empirical issue. The purpose of this study is therefore to evaluate the hedging effectiveness among these risk measures. Historical method and Monte Carlo simulation are applied to estimate the parameters needed for each risk measures. S&P 500 stock index futures are employed. The sample period is from 1998/01/01 to 2002/12/31. To distinguish the impacts of bull and bear markets, we further divide the sample period into two sub periods, which are from 1998/01/01 to 2000/06/30 and from 2000/07/01 to 2002/12/31. Empirical evidences report that, in general, the hedge ratio derived from minimum variance strategy outperforms the hedge ratios from the other three hedging strategies. Moreover, when comparing VaR with ES, ES is better than VaR under Monte Carlo simulation, which, in turn, suggests that we should include more downside data.