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International Journal of Econometrics and Financial Management
ISSN (Print): 2374-2011 ISSN (Online): 2374-2038 Website: http://www.sciepub.com/journal/ijefm Editor-in-chief: Tarek Sadraoui
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International Journal of Econometrics and Financial Management. 2014, 2(3), 82-94
DOI: 10.12691/ijefm-2-3-1
Open AccessEditorial

The Dynamic International Optimal Hedge Ratio

Xiaochun Liu1, and Brian Jacobsen2

1Department of Economics, Emory University, Atlanta, United States

2Chief Portfolio Strategist, Wells Fargo Funds Management, LLC, Milwaukee, United States

Pub. Date: June 09, 2014
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Cite this paper:
Xiaochun Liu and Brian Jacobsen. The Dynamic International Optimal Hedge Ratio. International Journal of Econometrics and Financial Management. 2014; 2(3):82-94. doi: 10.12691/ijefm-2-3-1

Abstract

Instead of modeling asset price and currency risks separately, this paper derives the international hedge portfolio, hedging asset price and currency risk simultaneously for estimating the dynamic international optimal hedge ratio. The model estimation is specified in a multivariate GARCH setting with vector error correction terms and estimated for the commodity and stock markets of the U.S., the U.K., and Japan.

Keywords:
optima hedge ratio international hedging multivariate GARCH currency risk hedge effectiveness and efficiency spot and futures markets

Creative CommonsThis work is licensed under a Creative Commons Attribution 4.0 International License. To view a copy of this license, visit http://creativecommons.org/licenses/by/4.0/

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