Generalized Hedge Ratio Estimation with an Unknown Model

Myers and Thompson (1989) noted that the model specification could have a large impact on the hedge ratio estimated. A huge literature exists on estimating hedge ratios, but the literature is lacking a formal treatment of model specification uncertainty. This research accomplishes that task by taking a Bayesian approach to hedge ratio estimation, where specification uncertainty is explicitly modeled. The methodology is applied to data on hedging of corn and soybeans and on cross-hedging of corn oil using soybean oil futures. Results show the potential benefits and insights gained from such an approach.


Subject(s):
Issue Date:
2005
Publication Type:
Conference Paper/ Presentation
PURL Identifier:
http://purl.umn.edu/19268
Total Pages:
34
Series Statement:
Selected Paper 136464




 Record created 2017-04-01, last modified 2017-08-22

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