Alternative Hedging Models for the Brazilian Exchange Market: A Comparative Analysis

Daniel Loureiro Araújo, Aureliano Bressan () and Clayton Peixoto Goulart

The IUP Journal of Applied Economics, 2007, vol. VI, issue 5, 45-69

Abstract: This paper attempts to assess the hedge effectiveness of four hedging models in the Brazilian futures exchange rate market, with daily data from January 1999 to September 2004. The models that were analyzed are naive (full hedge) model; conventional OLS model and error correction model with and without a GARCH error structure. As a general result, the error correction model was found to be superior to others, and the dynamic estimation of the conventional and error correction models seems to be enough to take into account the time-varying feature of the hedge ratios.

Date: 2007
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Persistent link: https://EconPapers.repec.org/RePEc:icf:icfjae:v:06:y:2007:i:5:p:45-69

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