Hedging iTraxx credit default swap index trading on an intraday basis: an empirical study

Cheng-Ran Du and Tim Brunne

Journal of Investment Strategies

Abstract: ABSTRACT We consider the equity and Bund futures as financial instruments to hedge standard 5Y iTraxx Europe Main and Crossover indexes. Our analysis is based on a four-month intraday time series for traded prices and quoted spreads, respectively. We find that a DAX futures based intraday hedging strategy is the most efficient one. While the cross-asset hedging strategy reduces the intraday market risks of iTraxx Europe positions, the overall hedging efficiency is limited.

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