The Analysis of Cross Hedging and Arbitrage Trading Strategies at Oil Price

碩士 === 輔仁大學 === 金融研究所 === 98 === This essay uses portfolio hedging theory and pair trading theory to investigate different hedging and trading strategies of oil. The sampled data includes the spot and future price of WTI and exchange rate between euro and U.S. dollars during 2000 to 2009. In hedging...

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Bibliographic Details
Main Authors: Chen Chen-Yi, 陳成一
Other Authors: Dr. Li-Ju Tsai
Format: Others
Language:zh-TW
Published: 2010
Online Access:http://ndltd.ncl.edu.tw/handle/80963261864259274416
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Summary:碩士 === 輔仁大學 === 金融研究所 === 98 === This essay uses portfolio hedging theory and pair trading theory to investigate different hedging and trading strategies of oil. The sampled data includes the spot and future price of WTI and exchange rate between euro and U.S. dollars during 2000 to 2009. In hedging strategies, we use three methods to estimate correlation coefficients; they are rolling correlation, exponential smoothing and DCC (dynamic conditional correlation). The testing periods are 2000-2004, 2005-2009, and 2000-2009. We find that: (1) Using the spot and future of crude oil to hedge have better results than using the spot price of crude oil and euro-rate.(2)We examine the correlations between the return on euro-rate and the return on oil price, and find that it is higher in 2000-2004 than in 2005-2009. (3)The rolling correlation method has the best hedging results among three correlation estimating methods, and DCC has the worst results. (4)The hedging effects in 2005-2009 are better than it in 2000-2004. (5)The hedging effects of DCC between euro-rate and oil price shows that weekly data have the better results than daily data. In trading strategies, we use cointegration test, the estimated period is one year and the trading period is three months. The sample data includes 36 months between October 1st, 2008 and September 31th, 2009. If we ignoring transaction cost, we’ll find: (1)The cointegraton relations between the spot price of crude oil and euro-rate only exist in 23th, 29th, 30th and 31th month while the cointegration relations between the spot and future of crude oil exist in all 36 months. (2)The best average return on the arbitrage between spot and euro-rate is 4.13%, and the best return on the arbitrage between the spot and future of crude oil is 12.19%