Asymmetric Co-movement Behaviors between Futures and Spot Positions and Dynamic Hedge Ratios under various Volatility Regime Combinations
This project analyzes dynamic co-movement behaviors between futures and spot positions via a state-varying framework. Specifically, we adopt Hamilton and Susmel (1994)’s Markov switching ARCH (hereafter SWARCH) model to identify high/low volatility regime at each time point by date itself and measuring co-movement sizes between spot and futures positions at various volatility states as well as establishing dynamic hedging ratio. Our empirical results are consistent with the following notions. First, the situation of both futures and spot positions during high volatility states will be associated with the maximum correlation measure between them. Second, by incorporating the character of state-varying correlation into the establishment of hedge ratio, we can create a more efficient futures hedge strategy with less risk.
futures index futures and spot positions hedge ratio Markov-switching model
Ming-Yuan Leon Li
Department of Accountancy and Graduate Institute of Finance and Banking National Cheng Kung University, Taiwan
国际会议
昆明
英文
1-26
2005-07-05（万方平台首次上网日期，不代表论文的发表时间）