Some Recent Developments in Futures Hedging

41 Pages Posted: 28 Dec 2000

See all articles by Donald D. Lien

Donald D. Lien

University of Texas at San Antonio - College of Business - Department of Economics

Yiu Kuen Tse

Singapore Management University - School of Social Sciences

Date Written: November 2000

Abstract

The use of futures contracts as a hedging instrument has been the focus of much research. At the theoretical level, an optimal hedge strategy is traditionally based on the expected-utility maximization paradigm. A simplification of this paradigm leads to the minimum-variance criterion. Although this paradigm is quite well accepted, alternative approaches have been sought. At the empirical level, research on futures hedging has benefited from the recent developments in the econometrics literature. Much research has been done on improving the estimation of the optimal hedge ratio. As more is known about the statistical properties of financial time series, more sophisticated estimation methods are proposed. In this survey we review some recent developments in futures hedging. We delineate the theoretical underpinning of various methods and discuss the econometric implementation of the methods.

JEL Classification: G20

Suggested Citation

Lien, Donald and Tse, Yiu Kuen, Some Recent Developments in Futures Hedging (November 2000). Available at SSRN: https://ssrn.com/abstract=253645 or http://dx.doi.org/10.2139/ssrn.253645

Donald Lien

University of Texas at San Antonio - College of Business - Department of Economics ( email )

6900 North Loop 1604 West
San Antonio, TX 78249
United States
210-458-4313 (Phone)
210-458-4308 (Fax)

Yiu Kuen Tse (Contact Author)

Singapore Management University - School of Social Sciences ( email )

469 Bukit Timah Road
Federal Building #02-05
Singapore, 259756
Singapore
+65 822-0257 (Phone)
+65 822-8081 (Fax)

HOME PAGE: http://staff.mysmu.edu/yktse/yktsehp.htm

Register to save articles to
your library

Register

Paper statistics

Downloads
990
Abstract Views
3,169
rank
22,490
PlumX Metrics