| Summary: | 碩士 === 中原大學 === 企業管理研究所 === 99 === Hedging has become an important issue in Finance during recent financial crises periods. In particular, silver futures contracts have been gained more and more attention by the investors and companies than before as silver futures provides efficient hedging protection. The price of silver recently hit a 30-year peak because of the drastic increase in silver investment over the past two years. Such increase has a great impact on Taiwan's economy as Taiwan is a major import country of silver. Silver price is also affected by the exchange rate fluctuations between US dollars and New Taiwan dollars.
This study examines the use of various hedging strategies (i.e. foreign exchange (FX) futures, FX forward contracts and silver futures contracts) by employing the OLS, GARCH and EGARCH models to calculate the hedge ratios. This investigation then compares the performance of different hedging strategies. The conclusions are summarized below:
1.Empirical findings indicate that there are little difference among the OLS, GARCH, and EGARCH models in terms of hedging performance.
2.This study finds that the adoption of the silver futures and the US dollars futures contracts can be avoided 80% of the volatility risk in spot price. However, the hedging effect will be decreased if the exchange rate risk is ignored.
3.This investigation also finds that the use of US dollars forward contacts may improve the hedging efficiency. However, the hedging effect with the Japanese yen futures contracts seemed to reduce the hedging efficiency. This study concludes that the overall performance of cross hedging is not certainly better than that of direct hedging.
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