Measuring the Hedge Ratio: A GCC Perspective

Ahmad Bash, Abdullah M. Al-Awadhi and Fouad Jamaani

International Journal of Economics and Finance, 2016, vol. 8, issue 7, 1

Abstract: In this paper, we examine the effectiveness of minimising the variance of the hedge ratio using different econometric models for the GCC currencies under money-market hedging and cross-currency hedging. Specifically, we determine whether different model specifications and estimation methods yield different hedge-effectiveness results. In other words, does the sophistication of the model improve the effectiveness of the hedge? Our results show that these econometric models fail either to add value or to improve the effectiveness of the hedge.

Date: 2016
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