A Note on Minimum Riskiness Hedge Ratio
11 Pages Posted: 17 Aug 2014 Last revised: 13 Jan 2017
Date Written: August 11, 2014
Abstract
Regardless of the distributions of spot and futures returns, the hedge ratio determined by minimizing the portfolio’s Aumann and Serrano (2008) index of riskiness is always smaller than the hedge ratio determined by minimizing the portfolio’s variance. It is also demonstrated that the Foster and Hart (2009) riskiness hedge ratio does not exist.
Keywords: riskiness, economic index of riskiness, operational measure of riskiness, hedge ratio
JEL Classification: G11, G13, G32
Suggested Citation: Suggested Citation
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