Repository logo
  • Log In
    New user? Click here to register.Have you forgotten your password?
University College Dublin
  • Colleges & Schools
  • Statistics
  • All of DSpace
  • Log In
    New user? Click here to register.Have you forgotten your password?
  1. Home
  2. College of Business
  3. School of Business
  4. Centre for Financial Markets Working Papers
  5. Hedging : scaling and the investor horizon
 
  • Details
Options

Hedging : scaling and the investor horizon

File(s)
FileDescriptionSizeFormat
Download WP-O9-06-cotter-hanly-hedging.pdf361.9 KB
Author(s)
Cotter, John 
Hanly, Jim 
Uri
http://hdl.handle.net/10197/2597
Date Issued
August 2009
Date Available
25T16:18:36Z November 2010
Abstract
This paper examines the volatility and covariance dynamics of cash and futures contracts that underlie the Optimal Hedge Ratio (OHR) across different hedging time horizons. We examine whether hedge ratios calculated over a short term hedging horizon can be scaled and successfully applied to longer term horizons. We also test the equivalence of scaled hedge ratios with those calculated directly from lower frequency data and compare them in terms of hedging effectiveness. Our findings show that the volatility and covariance dynamics may differ considerably depending on the hedging horizon and this gives rise to significant differences between short term and longer term hedges. Despite this, scaling provides good hedging outcomes in terms of risk reduction which are comparable to those based on direct estimation.
Sponsorship
Not applicable
Type of Material
Working Paper
Publisher
University College Dublin. School of Business. Centre for Financial Markets
University College Dublin. Geary Institute
Series
Centre for Financial Markets working paper series
WP 09 06
UCD Geary Institute Discussion Paper Series
WP 10 02
Keywords
  • Hedging effectiveness...

  • Scaling

  • Volatility modelling

  • Forecasting

Classification
G10
G12
G15
Subject – LCSH
Hedging (Finance)--Evaluation
International finance
Web versions
http://www.ucd.ie/bankingfinance/docs/wp/WP-O9-06-cotter-hanly-hedging.pdf
Language
English
Status of Item
Not peer reviewed
This item is made available under a Creative Commons License
https://creativecommons.org/licenses/by-nc-sa/1.0/
Owning collection
Centre for Financial Markets Working Papers
Views
2440
Last Week
1
Acquisition Date
Jan 26, 2023
View Details
Downloads
469
Last Week
1
Acquisition Date
Jan 26, 2023
View Details
google-scholar
University College Dublin Research Repository UCD
The Library, University College Dublin, Belfield, Dublin 4
Phone: +353 (0)1 716 7583
Fax: +353 (0)1 283 7667
Email: mailto:research.repository@ucd.ie
Guide: http://libguides.ucd.ie/rru

Built with DSpace-CRIS software - Extension maintained and optimized by 4Science

  • Cookie settings
  • Privacy policy
  • End User Agreement