Pricing and Hedging Copper Futures on the London Metal Exchange

The IUP Journal of Applied Finance, Vol. 18, No. 1, January 2012, pp. 68-98

Posted: 13 Sep 2012

See all articles by Souha Boutouria

Souha Boutouria

University of Sfax - Higher Institute of Business Administration

Fathi Abid

University of Sfax, Faculty of Economic and Management Sciences, Probability & Statistics Laboratory

Date Written: January 13, 2012

Abstract

The purpose of this paper is to examine the behavior of copper spot prices in London Metal Exchange. Besides, we examine the relation between hedging effectiveness and the maturity of the contract. This research provides an empirical comparison of different econometric techniques in the context of hedging the market risk of copper traded on the London Metal Exchange. It is found that the VAR-MGARCH model estimates of time-varying hedge ratio provide highest variance reduction.

Suggested Citation

Boutouria, Souha and Abid, Fathi, Pricing and Hedging Copper Futures on the London Metal Exchange (January 13, 2012). The IUP Journal of Applied Finance, Vol. 18, No. 1, January 2012, pp. 68-98. Available at SSRN: https://ssrn.com/abstract=2145797

Souha Boutouria (Contact Author)

University of Sfax - Higher Institute of Business Administration ( email )

Road of the Airport 4
Sfax, BP 1013
Tunisia

Fathi Abid

University of Sfax, Faculty of Economic and Management Sciences, Probability & Statistics Laboratory ( email )

Road of Airport, Km 4
Sfax, sfax 3018
Tunisia
+216 7427 9154 (Phone)

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