 Optimal gasoline hedging strategies using futures contracts and exchange-traded fundsKunlapath Sukcharoen, Hankyeung Choi and David Leatham () Applied Economics, 2015, vol. 47, issue 32, 3482-3498 Abstract: This article employs a variety of econometric models (including OLS, VEC/VAR, DCC GARCH and a class of copula-based GARCH models) to estimate optimal hedge ratios for gasoline spot prices using gasoline exchange-traded funds (ETFs) and gasoline futures contracts. We then compare their performance using four different measures from the perspective of both their hedging objectives and trading position using four different measures: variance reduction measure, utility-based measure and two tail-based measures (value at risk and expected shortfall). The impact of the 2008 financial market crisis on hedging performance is also investigated. Our findings indicate that, in terms of variance reduction, the static models (OLS and VEC/VAR) are found to be the best hedging strategies. However, more sophisticated time-varying hedging strategies could outperform the static hedging models when the other measures are used. In addition, ETF hedging is a more effective hedging strategy than futures hedging during the high-volatility (crisis) period, but this is not always the case during the normal time (post-crisis) period. Date: 2015 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:taf:applec:v:47:y:2015:i:32:p:3482-3498 Ordering information: This journal article can be ordered from DOI: 10.1080/00036846.2015.1016210 Access Statistics for this article Applied Economics is currently edited by Anita Phillips More articles in Applied Economics from Taylor & Francis Journals |
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