Hedging strategy for crude oil trading and the factors influencing hedging effectiveness

Won-Cheol Yun and Hyun Jae Kim

Energy Policy, 2010, vol. 38, issue 5, 2404-2408

Abstract: This study analyzes the hedging effectiveness of different hedge type and period by Korean oil traders. Both crude oil price and exchange rate risks are considered. Theoretical models are formulated to estimate the hedge ratios by separate and complex hedge types. The hedging period covers 1-12 months. This study also performs some statistical works to investigate the relationship between the hedging effectiveness and the crude oil price sensitivity to exchange rate. In addition, the relationship between the hedging effectiveness and the volatilities of crude oil price and exchange rate is analyzed.

Keywords: Crude; oil; Complex; hedge; Hedging; effectiveness (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:enepol:v:38:y:2010:i:5:p:2404-2408

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