Hedge Ratio for Multinational Stock Index

• Main Authors: Yu-Jung Chen, 陳禹蓉
• Other Authors: Rachel Juiching Huang
• Format: Others
• Language: zh-TW
• Published: 2017
• Online Access: http://ndltd.ncl.edu.tw/handle/15846816622152340257

碩士 === 國立中央大學 === 財務金融學系 === 105 === Hedge is an important part of risk management. It comes up with a critical problem to be addressed in determine hedge ratio. In this paper, we propose three spot-futures hedging methods that determines the optimal hedge ratio by minimizing the riskiness of hedged portfolio returns, where the riskiness is measured by the index of Aumann and Serrano (2008), Foster and Hart (2009) and Bali, Cakici and Chabi-Yo (2011). Unlike the risk measurements widely used in the literature, the riskiness indexes employed in our methods not only have better economic interpretation but also satisfy monotonicity with respect to stochastic dominance. We add variance which is widely used to measure the risk of portfolio returns as one of our methods in order to compare with traditional risk measurements. Moreover, we examine the hedge ratio between different countries. Our empirical result shows that when we take dynamic hedging strategy, variance is the most stable hedge ratio method and the difference between countries is the smallest. Bali, Cakici and Chabi-Yo (2011) is the most unstable method and the difference between countries is the biggest. Hedge ratio measure by Aumann and Serrano (2008)and Foster and Hart (2009) are closed.