Copula based Dynamic Hedging Strategy with Futures

We present in this paper a dynamic hedging strategy for futures based exclusively on copula functions. We develop an algorithm based on numerical simulations from estimated copula and marginal probability function to obtain innovations. We illustrate our approach through an empirical example with Crude Oil and Gold. OLS static estimate showed itself improper and the proposed algorithm obtained very good results in spot/future variance reduction strategy.

MoreLess

Year of publication:	2012
Authors:	Righi, Marcelo Brutti ; Ceretta, Paulo Sergio
Published in:	Economics Bulletin. - AccessEcon, ISSN 1545-2921. - Vol. 32.2012, 4, p. 3394-3400
Publisher:	AccessEcon
Subject:	Dynamic Hedging Strategy \| Future Markets \| Copula Functions

More details

Extent:	application/pdf
Type of publication:	Article
Classification:	G1 - General Financial Markets ; C0 - Mathematical and Quantitative Methods. General
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10011278689