Optimal Currency Hedging Overlay Strategies for Taiwan’s Pension Fund
Date Issued
2007
Date
2007
Author(s)
Wang, Shaio-Tien
DOI
en-US
Abstract
In this paper, we are trying to determine the optimal currency hedging overlay strategies for Taiwanese pension funds. Markowitz Mean-Variance model and Williams Maximum Probability Approach are used to construct a spot position as the hedging subject. Then, we apply the conventional hedging effectiveness as well as Sharpe ratio to analyze the efficiency of single contract and multiple contracts overlay strategies. We discover that dynamic hedge under minimum-variance model is the most efficient based on risk reduction. Secondly, the hedging effectiveness of dual and triple overlay strategies are greater than the other strategies based on risk-adjusted performance. Finally, the hedging effectiveness for a longer duration is found to be more efficient than a shorter one.
Subjects
退休基金
外匯避險
多元避險
動態避險
pension
overlay
currency hedge
proxy hedge
Type
thesis
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