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    Please use this identifier to cite or link to this item: https://tkuir.lib.tku.edu.tw/dspace/handle/987654321/18360

    Title: Hedging with Zero-Value at Risk Hedge Ratio
    Authors: Hung, Jui-cheng;Chiu, Chien-liang;Lee, Ming-chih
    Contributors: 淡江大學財務金融學系
    Keywords: financial market
    Date: 2006-02
    Issue Date: 2013-03-12 10:56:59 (UTC+8)
    Publisher: Oxon: Routledge
    Abstract: In this paper we derive a new mean-risk hedge ratio based on the concept of Value at Risk (VaR). The proposed zero-VaR hedge ratio has an analytical solution and it converges to the MV hedge ratio under a pure martingale process or normality. A bivariate constant correlation GARCH(1,1) model with an error correction term is employed to estimate expected returns and time-varying volatilities of the spot and futures in S&P 500 index. The empirical results indicates that the joint normality and martingale process do not hold for S&P 500 futures and the conventional minimum variance hedge is inappropriate for a hedger who only cares about downside risk. Eventually, this article provides an alternative hedging method for a practitioner to use the concept of Value-at-Risk to reflect the risk-averse level.
    Relation: Applied Financial Economics 16(3), pp.259-269
    DOI: 10.1080/09603100500394127
    Appears in Collections:[Graduate Institute & Department of Banking and Finance] Journal Article

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