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TREASURY BILL FUTURES AS A HEDGING TOOL: A RISK‐RETURN APPROACH
Author(s) -
Howard Charles T.,
D'Antonio Louis J.
Publication year - 1986
Publication title -
journal of financial research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.319
H-Index - 49
eISSN - 1475-6803
pISSN - 0270-2592
DOI - 10.1111/j.1475-6803.1986.tb00433.x
Subject(s) - treasury , futures contract , hedge , cash , market neutral , actuarial science , basis risk , econometrics , economics , risk–return spectrum , financial economics , business , finance , portfolio , capital asset pricing model , ecology , archaeology , biology , history
The primary purpose of this study is to measure the hedging performance of Treasury Bill Futures on a risk‐return basis. A theoretical model is presented and hedging effectiveness is tested using T‐Bill cash and futures data. Successful hedging depends critically upon the ability to determine the optimal hedge ratio. The results also indicate that the traditional one‐to‐one hedge outperforms the more sophisticated hedge ratio models; however, even here the risk‐return benefits of hedging are minimal.