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Time varying hedge ratios : an application to the Indian stock futures market

journal contribution
posted on 01.01.2007, 00:00 authored by Prasad BhattacharyaPrasad Bhattacharya, Harminder SinghHarminder Singh, Gerard Gannon
This paper investigates time-varying optimal hedge ratios in individual stock futures markets in India. The analysis employs data on individual stock futures from an unexplored but highly traded (both in terms of volume and quantity) emerging market. The hedge ratios derived in this study incorporate mean reversion in volatility, which is an important extension of the bivariate BEKK-GARCH model of Engle and Kroner. This extension generates improved optimal hedge ratios over the traditional BEKK-GARCH model and static error correction type alternatives.

History

Journal

Review of futures markets

Volume

16

Issue

1

Pagination

75 - 104

Publisher

Kent State University

Location

Kent, Ohio

ISSN

1933-7116

Language

eng

Publication classification

C1 Refereed article in a scholarly journal

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