Cross-Hedging: Basis Risk and Choice of the Optimal Hedging Vehicle

Mark G Castelino, Jack C Francis and Avner Wolf

The Financial Review, 1991, vol. 26, issue 2, 179-210

Abstract: The basis between a futures contract and its underlying instruments is an important measure of the cost of using the futures contract to hedge. In a cross-hedge, the relative size of the basis of alternative hedging vehicles often plays a decisive role in the selection of the optimal hedging vehicle. After adjusting hedge ratios for basis risk, a genuine risk-cost trade-off is seen in hedging ninety-day certificates of deposit with either the Treasury bill contract or the Eurodollar contract. The Eurodollar contract was not uniformly superior as generally believed. Copyright 1991 by MIT Press.

Date: 1991
References: Add references at CitEc
Citations: View citations in EconPapers (4)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:finrev:v:26:y:1991:i:2:p:179-210

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0732-8516

Access Statistics for this article

The Financial Review is currently edited by Cynthia J. Campbell and Arnold R. Cowan

More articles in The Financial Review from Eastern Finance Association Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().