Intraday Hedge Ratios and Option Pricing

Stavros Degiannakis and Christos Floros

Chapter 7 in Modelling and Forecasting High Frequency Financial Data, 2015, pp 243-273 from Palgrave Macmillan

Abstract: Abstract The purpose of the first part of the chapter is to present techniques for estimating intraday hedge ratios. We introduce some underlying theory and motivation for the estimation of optimal hedge ratios and present the different approaches taken in the literature. For empirical application to the hourly hedging of the DAX index, we estimate naive strategies as well as some minimum-variance hedge ratios: constant over-time (MV-OLS) and dynamic (BEKK, asymmetric BEKK, CCC, DCC). For this, ultra-short horizon dynamic strategies seem to provide slightly better results.

Keywords: Option Price; Future Market; GARCH Model; Future Contract; Conditional Correlation (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-137-39649-5_7

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DOI: 10.1057/9781137396495_7

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