Hedging : scaling and the investor horizon

DC FieldValueLanguage
dc.contributor.authorCotter, John-
dc.contributor.authorHanly, Jim-
dc.date.accessioned2010-11-25T16:18:36Z-
dc.date.available2010-11-25T16:18:36Z-
dc.date.issued2009-08-
dc.identifier.urihttp://hdl.handle.net/10197/2597-
dc.description.abstractThis 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.en
dc.description.sponsorshipNot applicableen
dc.format.extent370588 bytes-
dc.format.mimetypeapplication/pdf-
dc.language.isoenen
dc.publisherUniversity College Dublin. School of Business. Centre for Financial Marketsen
dc.publisherUniversity College Dublin. Geary Institute-
dc.relation.ispartofseriesCentre for Financial Markets working paper seriesen
dc.relation.ispartofseriesWP 09 06en
dc.relation.ispartofseriesUCD Geary Institute Discussion Paper Series-
dc.relation.ispartofseriesWP 10 02-
dc.relation.requiresEconomists Online Collectionen
dc.subjectHedging effectiveness;en
dc.subjectScalingen
dc.subjectVolatility modellingen
dc.subjectForecastingen
dc.subject.classificationG10en
dc.subject.classificationG12en
dc.subject.classificationG15en
dc.subject.lcshHedging (Finance)--Evaluationen
dc.subject.lcshInternational financeen
dc.titleHedging : scaling and the investor horizonen
dc.typeWorking Paperen
dc.internal.availabilityFull text availableen
dc.internal.webversionshttp://www.ucd.ie/bankingfinance/docs/wp/WP-O9-06-cotter-hanly-hedging.pdf-
dc.statusNot peer revieweden
dc.neeo.contributorCotter|John|aut|-
dc.neeo.contributorHanly|Jim|aut|-
item.fulltextWith Fulltext-
item.grantfulltextopen-
Appears in Collections:Geary Institute Working Papers
Centre for Financial Markets Working Papers
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