Hedging strategy for financial variables and commodities

Ilyes Abid (), Abderrazak Dhaoui, Khaled Guesmi and Olfa Kaabia ()
Additional contact information
Ilyes Abid: ISC Business School Paris
Olfa Kaabia: INSEEC U, INSEEC Grande école Paris

Economics Bulletin, 2020, vol. 40, issue 2, 1368-1379

Abstract: This paper investigates the hedging effectiveness of different hedge types. The S&P 500 index, oil prices, the VIX index, gold prices, bond prices, and CDS spreads are considered. The Dynamic Multivariate GARCH is used to estimate the hedge ratios by separate and complex hedge types from December 2007 to June 2018. This study also performs some statistical works to investigate the relationship between the hedging effectiveness and the commodities prices sensitivity to financial variables. The results show that gold and CDS provide higher hedging effectiveness against equity market losses. Negative correlations between the equity market and VIX are particularly notable, suggesting the economic benefits of diversification.

Keywords: Equity markets; CDS; Gold; Crude Oil; VIX; Hedging; Dynamic correlations; GARCH models. (search for similar items in EconPapers)
JEL-codes: G1 G2 (search for similar items in EconPapers)
Date: 2020-05-19
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Citations: View citations in EconPapers (3)

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