Open AccessResearch on the Hedge Ratio of China's Crude Oil Futures — Based on DCC-GARCH Model
Author(s) -
Hao Du
Publication year - 2021
Publication title -
modern economics and management forum
Language(s) - English
Resource type - Journals
eISSN - 2717-6053
pISSN - 2717-6045
DOI - 10.32629/memf.v2i3.390
Subject(s) - futures contract , crude oil , autoregressive conditional heteroskedasticity , econometrics , china , hedge , leverage (statistics) , economics , leverage effect , financial economics , mathematics , statistics , petroleum engineering , engineering , volatility (finance) , geography , ecology , biology , archaeology
Crude oil plays an important role in economic development. This paper chooses China’s crude oil futures and crude oil actuals as the research objects, and builds the DCC-GARCH model to study the hedge ratio under the risk minimization standard. The hedge ratios obtained from the DCC-GARCH model will be compared with those obtained from OLS, B-VAR and VECM models. The empirical results prove that: China’s crude oil futures and actuals have a significant reverse “leverage effect”; China’s crude oil futures have a variance reduction of more than 70% under all models; the DCC-GARCH model achieves the best hedging performance in the four models.