EconPapers    
Economics at your fingertips  
 

Cross Hedging with Single Stock Futures

Chris Brooks, Ryan Davies and Sang Soo Kim ()
Additional contact information
Sang Soo Kim: ICMA Centre, University of Reading

ICMA Centre Discussion Papers in Finance from Henley Business School, University of Reading

Abstract: This study evaluates the efficiency of cross hedging with the new single stock futures (SSF) contracts recently introduced in the United States. We use matched sample estimation techniques to select SSF contracts that will reduce the basis risk of crossing hedging and will yield the most efficient hedging portfolio. Employing multivariate matching techniques with cross-sectional matching characteristics, we can improve hedging efficiency while at the same time overcoming the contingency of the correlation between spot and futures prices on the sample period and length. Overall, we find that the best hedging performance is achieved through a portfolio that is hedged with market index futures and a SSF matched by both historical return correlation and cross-sectional matching characteristics. We also find it preferable to retain the chosen SSF contracts for the whole out-of-sample period but to re-estimate the optimal hedge ratio for each rolling window.

Pages: 27 pages
Date: 2005-07
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Published in Assurances et gestion des risques 74:4, 2007, 473-504

Downloads: (external link)
http://www.icmacentre.ac.uk/pdf/discussion/DP2004-16v2.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.icmacentre.ac.uk/pdf/discussion/DP2004-16v2.pdf [302 Found]--> https://www.icmacentre.ac.uk/pdf/discussion/DP2004-16v2.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:rdg:icmadp:icma-dp2004-15

Access Statistics for this paper

More papers in ICMA Centre Discussion Papers in Finance from Henley Business School, University of Reading Contact information at EDIRC.
Bibliographic data for series maintained by Marie Pearson ().

 
Page updated 2025-03-31
Handle: RePEc:rdg:icmadp:icma-dp2004-15