Mean-variance hedging with oil futures

Liao Wang () and Johannes Wissel ()

Finance and Stochastics, 2013, vol. 17, issue 4, 683 pages

Abstract: We analyze mean-variance-optimal dynamic hedging strategies in oil futures for oil producers and consumers. In a model for the oil spot and futures market with Gaussian convenience yield curves and a stochastic market price of risk, we find analytical solutions for the optimal trading strategies. An implementation of our strategies in an out-of-sample test on market data shows that the hedging strategies improve long-term return-risk profiles of both the producer and the consumer. Copyright Springer-Verlag Berlin Heidelberg 2013

Keywords: Mean-variance hedging; Fuel hedging; Energy futures market; 60H30; 91B30; 91G20; 91G80; C61; G11; G13 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (3)

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DOI: 10.1007/s00780-013-0203-x

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