Application of riskiness on spot-forwards hedge ratio
Date Issued
2015
Date
2015
Author(s)
Chang, Chun-Po
Abstract
This study investigates the effect of a new spot-futures hedging ratio method proposed by Yi-Ting Chen, Keng-Yu Ho, and Larry Y. Tzeng (2014), and that of a new performance measurement based on Sharpe ratio. These methods determine the optimal hedge ratio by minimizing the riskiness of hedged portfolio returns and maximizing the new performance ratio respectively, where the riskiness is measured by the index of Aumann and Serrano (2008). The riskiness index employed in these methods satisfies monotonicity with respect to stochastic dominance, unlike the risk measurements widely used in the literature. Also, I provide empirical examples of deliverable forward exchange and non-deliverable forward exchange to demonstrate and test both optimal hedge ratios. The chosen sample is from 2000 to 2014. The empirical result is consistent with theoretical properties except for the optimal hedge ratio from the new performance measurement.
Subjects
Riskiness
Sharpe Ratio
Deliverable Forward
Non-Deliverable Forward
Optimal Hedge Ratio
Performance Measurement
Type
thesis
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ntu-104-R02723039-1.pdf
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