An Application and Comparison for the Crude Oil Markets in Hedging with Return- and Range-based Dynamic Conditional Correlation Approaches

• Main Authors: Zhi-Hung Huang, 黃智鴻
• Other Authors: Chun-Chou Wu
• Format: Others
• Language: zh-TW
• Published: 2010
• Online Access: http://ndltd.ncl.edu.tw/handle/54548032558239745315

碩士 === 國立高雄第一科技大學 === 財務管理所 === 98 === This paper explores the hedge strategies of crude oil markets and it utilizes mainly the new hedge performance criterion, the Certain Equivalent approach, to compare the different strategies. The CE approach is another criterion of this study besides the conventional Enderington approach. Under the conventional Enderington criterion framework, all the hedge strategies in this paper have 92 percent efficiency gain in different period. It indicates that using futures as hedging tools is a useful strategy. Furthermore, Dynamic hedging models are superior to static one, and have 1 percent additional efficiency gain. Finally, the return-based DCC model is superior to the rest of all models, including the static model (naïve hedged approach) and Dynamic models (rollover OLS method and the range-based DCC model). Thus GARCH-DCC is the best hedging model in the crude oil market. In addition, the forecasted hedging performance of CARR-DCC model is the best. On the other hand, investors prefer utilizing Dynamic hedging model to hedge crude oil spot under the new certain equivalent framework. Moreover, investors prefer utilizing CARR-DCC model to be the hedge strategy when the crude oil price goes up. On the contrary, investors prefer using naïve hedged approach when crude the crude oil price goes down.