A0809
Title: Re-balancing hedge position with statistics of hedge ratios: Concepts and applications
Authors: Cy Sin - National Tsing Hua University (Taiwan) [presenting]
Abstract: Recently, strong evidence has been claimed to be found indicating that advanced econometric models do not improve hedge efficiency significantly, if at all. As a matter of fact, dynamic hedging attempts to strike a balance between hedging effectiveness and transaction costs. Using the Garch asymptotic theories, the asymptotic properties of the hedge ratio are derived. As a result, a natural and simple statistic of re-balancing is constructed, namely, the (asymptotic) standard deviation of the hedge ratio. The method is applied to a number of paired variables, such as WTI Crude Oil Futures and Spot Price.
