Hedge ratios in Greek stock index futures market

Christos Floros and Dimitrios Vougas

Applied Financial Economics, 2004, vol. 14, issue 15, 1125-1136

Abstract: This paper examines hedging in Greek stock index futures market. The focus is on various techniques to estimate constant or time-varying hedge ratios. For both available stock index futures contracts of the Athens Derivatives Exchange (ADEX), a variety of econometric models are employed to derive and estimate underlying hedge ratios. Standard OLS regressions, simple and vector error correction models, as well as multivariate generalized autoregressive heteroscedasticity (M-GARCH) models are employed to estimate corresponding hedge ratios that can be employed in hedging (viewed as risk management). In both cases for Greek stock index futures, M-GARCH models (capturing time-variation) provide best hedging ratios, in line with similar findings in the literature. These models are strongly recommended to risk managers dealing with Greek stock index futures.

Date: 2004
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DOI: 10.1080/09603100412331297702

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