NDLI: A New Model of Minimum Variance Hedge Ratio: EGARCH-Copula-EWMA

Content Provider	IEEE Xplore Digital Library
Author	Yang Jian-Hui Chen Ying-Ying
Copyright Year	2013
Description	Author affiliation: Sch. of Bus. Adm., South China Univ. of Technol., Guangzhou, China (Yang Jian-Hui; Chen Ying-Ying)
Abstract	This paper proposes a new model to calculate minimum variance hedge ratio based on EGARCH-Copula-EWMA model. Based on Minimum variance hedging model, the new model calculates Futures yield rate by EGARCH model and Spot yield rate by EWMA model respectively when it calculates the median correlation coefficient of Futures yield rate and Spot yield rate. The new model make the nonlinear phase-matching of Futures yield rate and Spot yield rate which improve the accuracy of the correlation coefficient in case the price of Futures or spot has large fluctuations. We choose the Aluminum Futures contracts AL1208 and the price of Aluminum spot in the same period to test the model, the effectiveness of the portfolio is 0.7862707, which reduce the risk comparing with non-hedging. The conclusion shows that the model can be used in hedging to lessen the risk of spot price effectively.
Sponsorship	Leshan Normal Univ.
Starting Page	812
Ending Page	816
File Size	152765
Page Count	5
File Format	PDF
e-ISBN	9781479925490
DOI	10.1109/CIS.2013.177
Language	English
Publisher	Institute of Electrical and Electronics Engineers, Inc. (IEEE)
Publisher Date	2013-12-14
Publisher Place	China
Access Restriction	Subscribed
Rights Holder	Institute of Electrical and Electronics Engineers, Inc. (IEEE)
Subject Keyword	Correlation coefficient Futures Spot Hedge ratio Predictive models Mathematical model Modeling Equations Portfolios Standards EWMA-Copula-EGARCH model
Content Type	Text
Resource Type	Article

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