Optimal Hedge Ratio estimation: GARCH (1,1) approach, a new model

Authors

  • A. García Claremont University
  • J. Rositas Autonomous University of Nuevo León image/svg+xml
  • M. H. Badii Autonomous University of Nuevo León image/svg+xml

DOI:

https://doi.org/10.29105/rinn3.6-5

Keywords:

GARCH (1, 1), hedge Ratio estimation

Abstract

An estimation of the Optimal Hedge Ratio on future markets is developed. The methodology incorporates forecasting the volatility and correlation of the spot and future prices using a GARCH (1,1) model, and under these estimations compute the optimal hedge ratio. This document shows a clear example of the methodology, using gold futures to hedge the risk exposure.

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References

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Published

2006-07-21

How to Cite

García, A., Rositas, J., & Badii, M. H. (2006). Optimal Hedge Ratio estimation: GARCH (1,1) approach, a new model. Innovaciones De Negocios, 3(6), 227–242. https://doi.org/10.29105/rinn3.6-5