Re-evaluating hedging performance for asymmetry : the case of crude oil

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Title: Re-evaluating hedging performance for asymmetry : the case of crude oil
Authors: Cotter, John
Hanly, Jim
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Date: 2012
Online since: 2012-01-31T16:52:12Z
Abstract: We examine whether the hedging effectiveness of crude oil futures is affected by asymmetry in the return distribution by applying tail specific metrics to compare the hedging effectiveness of both short and long hedgers. The hedging effectiveness metrics we use are based on Lower Partial Moments (LPM), Value at Risk (VaR) and Conditional Value at Risk (CVaR). Comparisons are applied to a number of hedging strategies including OLS, and both Symmetric and Asymmetric GARCH models. We find that OLS provides consistently better performance across different measures of hedging effectiveness as compared with GARCH models, irrespective of the characteristics of the underlying distribution.
Funding Details: Science Foundation Ireland
Type of material: Book Chapter
Publisher: Emerald
Keywords: Hedging performanceAsymmetryLower partial momentsValue at riskConditional value at risk
Subject LCSH: Hedging (Finance)
Risk--Econometric models
DOI: 10.1108/S1569-3759(2012)0000094003
Language: en
Status of Item: Peer reviewed
Is part of: Batten, J. and Wagner, N. (eds.). Derivative Securities Pricing and Modelling
Appears in Collections:FMC² Research Collection
Business Research Collection

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