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Optimal Hedge Ratio estimation: GARCH (1,1) approach, a new model
Author(s) -
Antoni Ferrer Garcia,
J. Rositas,
M. H. Badii
Publication year - 2017
Publication title -
innovaciones de negocios
Language(s) - Spanish
Resource type - Journals
ISSN - 2007-1191
DOI - 10.29105/rinn3.6-5
Subject(s) - autoregressive conditional heteroskedasticity , futures contract , volatility (finance) , economics , econometrics , hedge , financial economics , estimation , welfare economics , ecology , management , biology
. An estimation of the Optimal Hedge Ratio on future markets is developed. The methodology incorporates forecasting the volatility and correlation of the spot and future prices using a GARCH (1,1) model, and under these estimations compute the optimal hedge ratio. This document shows a clear example of the methodology, using gold futures to hedge the risk exposure.Key words: GARCH (1,1), hedge Ratio estimationResumen. Se desarrolla una estimación óptima de Hedge Ratio en los mercados del futuro. La metodología se basa en incorporar el pronostico de volatilidad y la correlación entre el precio del momento y del futuro usando el GARCH (1,1). Este documento demuestra un ejemplo claro de la metodología, utilizando el oro en el futuro para proteger el riesgo.Palabras Claves: Estimación de Hedge Ratio, GARCH (1,1)

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