Three Alternative Methods for Estimating Hedge Ratios

Sheng-Syan Chen (), Cheng-Few Lee (), Fu-Lai Lin () and Keshab Shrestha
Additional contact information
Sheng-Syan Chen: National Chengchi University
Cheng-Few Lee: Rutgers University
Fu-Lai Lin: Dar-Yeh University

Chapter 74 in Encyclopedia of Finance, 2022, pp 1703-1726 from Springer

Abstract: Abstract This chapter first discusses four different theoretical models, which include minimum variance, mean-variance, expected utility, and value-at-risk method. Then we use S&P 500 data to show how three alternative estimation methods can be used to estimate hedge ratio. These three methods include OLS method, GARCH method, and cointegration and error correction method. We found that OLS method is not sufficient for estimating hedge ratio.

Keywords: Hedge ratio; Cointegration; Minimum variance; Mean-variance hedge ratio; ARCH GARCH model (search for similar items in EconPapers)
Date: 2022
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-030-91231-4_74

Ordering information: This item can be ordered from
http://www.springer.com/9783030912314

DOI: 10.1007/978-3-030-91231-4_74

Access Statistics for this chapter

More chapters in Springer Books from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().