A Study on the Hedging Effectiveness of Copper Futures Based on the Copula-GJR-VAR Model and the ARIMA-GARCH Model

Shiying Huang, Jiayi Liang, Baojia Huang, Haohua Liang () and Yao Zhang
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Shiying Huang: Beijing Institute of Technology, School of Accounting and Finance
Jiayi Liang: Beijing Institute of Technology, School of Accounting and Finance
Baojia Huang: Beijing Institute of Technology, School of Accounting and Finance
Haohua Liang: Beijing Institute of Technology, School of Accounting and Finance
Yao Zhang: Jinan University, School of Economics

A chapter in Proceedings of the 2025 7th International Conference on Economic Management and Cultural Industry (ICEMCI 2025), 2025, pp 126-136 from Springer

Abstract: Abstract As a key industrial material, copper plays a critical role in numerous production and business activities. Its price volatility poses significant risks to enterprises, particularly in the absence of effective tools to manage uncertainty. This study focuses on the optimal hedge ratio of copper futures. Using return data from copper futures and spot markets during the period from 2020 to 2025, we employ both the Copula-GJR-VAR model and the ARIMA-DCC-GARCH model to estimate the hedge ratios. Comparative analysis reveals that the Copula-GJR-VAR model more effectively captures the asymmetric volatility and tail dependence structure between the copper futures and spot markets. Furthermore, it demonstrates superior performance in terms of hedging effectiveness.

Keywords: Futures; Hedging; Econometrics (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:spr:advbcp:978-94-6463-888-2_15

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DOI: 10.2991/978-94-6463-888-2_15

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