EconPapers    
Economics at your fingertips  
 

Hedging U.S. metals & mining Industry's credit risk with industrial and precious metals

Zaghum Umar, Syed Jawad Hussain Shahzad and Dimitris Kenourgios

Resources Policy, 2019, vol. 63, issue C, -

Abstract: This study examines the conditional correlation and the resulting optimal hedge ratios between the Credit Default Swap (CDS) spreads of the U.S. metal and mining industries, and the prices of copper, platinum, silver and gold using the daily date from December 14, 2007 to August 18, 2018. It compares volatility and conditional correlation of the CDSs and the metal prices by employing multivariate GARCH family models which capture distinct characteristics of financial time series. It utilizes rolling window estimation techniques and constructs the one-step-ahead out-of-sample forecasts for the dynamic conditional correlations and thereafter the optimal hedge ratios. In general, our results show that copper provides the best possible hedge for dealing with the U.S. metals and mining industries’ credit risks. Our results are robust under alternate model specifications, choice of model refits and distributional assumptions.

Keywords: Credit risk; Metal and mining industry; Precious metals; Hedging (search for similar items in EconPapers)
JEL-codes: G00 G19 G32 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (26)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0301420718304586
Full text for ScienceDirect subscribers only

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:eee:jrpoli:v:63:y:2019:i:c:9

DOI: 10.1016/j.resourpol.2019.101472

Access Statistics for this article

Resources Policy is currently edited by R. G. Eggert

More articles in Resources Policy from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

 
Page updated 2025-03-31
Handle: RePEc:eee:jrpoli:v:63:y:2019:i:c:9