RISK HEDGING BY USE OF HYBRID FUTURE CONTRACTS INDEX (CASE: IRAN FINANCIAL MARKET)

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ESKANDARI HAMID; ANVARY ROSTAMY A.ASGHAR; HUSSEINZADEH KASHAN ALI

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Journal Paper

Paper Information

Journal: FINANCIAL ENGINEERING AND SECURITIES MANAGEMENT (PORTFOLIO MANAGEMENT) Year:2016 | Volume:7 | Issue:28 Page(s): 55-72

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Information Journal Paper

Title

RISK HEDGING BY USE OF HYBRID FUTURE CONTRACTS INDEX (CASE: IRAN FINANCIAL MARKET)

Author(s)

ESKANDARI HAMID | ANVARY ROSTAMY A.ASGHAR | HUSSEINZADEH KASHAN ALI | Issue Writer Certificate

Keywords

RISK HEDGINGQ1

FUTURES CONTRACTQ1

MIN VARIANCE OPTIMAL HEDGE RATIOQ2

HEDGING EFFICIENCYQ2

ECONOMETRIC MODELSQ2

Abstract

Former local and foreign researches in RISK HEDGING area have investigated optimum delivery month and optimum RISK HEDGING ratio. In this research RISK HEDGING by use of all delivery months by use of weekly data is discussed because of low number of transactions and contract's volumes in Iran Mercantile Exchange. Three scenarios are defined. For this purpose three scenarios is defined. In the first scenario the number of positions on each delivery month is equal with the number of trades on each delivery month in previous week. In the second scenario positions are taken based on number of trades in previous trading day and in the third scenario positions are taken base on average number of trades in the last week. However, optimum hedge ratio should be considered in each delivery month. Static hedging ratio by use of minimum variance method and different econometrics models for in the sample and out of sample tests is calculated. Results show that three scenario has the ability to reduce risk. In the sample tests indicate that the first scenario with use of VAR model has the best efficiency and in the out of sample tests second scenario with Tarch model has the best efficiency.

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