Textbook Estimators of Multiperiod Optimal Hedging Ratios: Methodological Aspects and Application to the European Wheat Market

Gianluca Stefani and Marco Tiberti
Additional contact information
Marco Tiberti: Dipartimento di Scienza per l'Economia e l'Impresa

Working Papers - Economics from Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa

Abstract: This work deals with methodological and empirical issues related to multiperiod optimal hedging OLS estimators. We propose an analytical formula for the multiperiod minimum variance hedging ratio starting from the triangular representation of a cointegrated system DGP. Since estimating the hedge ratio matching the frequency of data with the hedging horizon leads to a sample size reduction problem, we carry out a Monte Carlo study to investigate the pattern and hedging efficiency of OLS hedging ratio based on overlapping vs non-overlapping observations exploring a range of hedging horizons and sample sizes. Finally, we applied our approach to real data for a cross hedging related to soft wheat.

Keywords: Future prices; Hedging; Monte Carlo; Soft wheat (search for similar items in EconPapers)
JEL-codes: C58 G13 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2013
New Economics Papers: this item is included in nep-ecm and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.disei.unifi.it/upload/sub/pubblicazioni/repec/pdf/wp29_2013.pdf (application/pdf)

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:frz:wpaper:wp2013_29.rdf

Access Statistics for this paper

More papers in Working Papers - Economics from Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa Via delle Pandette 9 50127 - Firenze - Italy. Contact information at EDIRC.
Bibliographic data for series maintained by Giorgio Ricchiuti ().