Optimal hedging with a regime-switching time-varying correlation GARCH model

Journal of Futures Markets

Volumn 27, Issue 5, 2007, Pages 495-516

  Lee, Hsiang Tai ^a   Yoder, Jonathan ^b  

^a NATIONAL CHI NAN UNIVERSITY   (Taiwan)

^b WASHINGTON STATE UNIVERSITY   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 34247495425     PISSN: 02707314     EISSN: 10969934     Source Type: Journal    
DOI: 10.1002/fut.20256     Document Type: Review

References (23)

1. Alizadeh, A., & Nomikos, N. (2004). A Markov regime switching approach for hedging stock indices. The Journal of Futures Markets, 24, 649-674.
2. Bera, A. K., Garcia, P., & Roh, J. S. (1997). Estimation of time-varying hedge ratios for corn and soybean: BGARCH and random coefficient approaches. Indian Journal of Statistics, 59, 346-368.
3. Bollerslev, T. (1990). Modelling the coherence in short-run nominal exchange rates: A multivariate generalized ARCH model. Review of Economics and Statistics, 72, 498-505.
4. Bollerslev, T., Engle, R. F., & Wooldridge, J. M. (1988). A capital asset pricing model with time-varying covariances. Journal of Political Economy, 96, 116-131.
5. Bystrom, H. N. E. (2003). The hedging performance of electricity futures on the Nordic power exchange. Applied Economics, 35, 1-11.
6. Cai, J. (1994). A Markov model of switching-regime ARCH. Journal of Business and Economic Statistics, 12, 309-316.
7. Engle, R. F., & Kroner, K. F. (1995). Multivariate simultaneous generalized ARCH. Econometric Theory, 11, 122-150.
8. Gagnon, L., & Lypny, G. (1995). Hedging short-term interest risk under time-varying distribution. The Journal of Futures Markets, 15, 767-783.
9. Gray, S. F. (1996). Modeling the conditional distribution of interest rates as a regime-switching process. Journal of Financial Economics, 42, 27-62.
10. Hamilton, J. D., & Susmel, R. (1994). Autoregressive conditional heteroscedasticity and changes in regime. Journal of Econometrics, 64, 307-333.
11. Kroner, K. F., & Sultan, J. (1993). Time-varying distribution and dynamic hedging with foreign currency futures. Journal of Financial and Quantitative Analysis, 28, 535-551.
12. Lee, H. T., & Yoder, J. K. (in press). A bivariate Markov regime switching GARCH approach to estimate the time varying minimum variance hedge ratio. Applied Economics.
13. Lee, H. T., Yoder, J. K., Mittelhammer, R. C., & McCluskey, J. J. (2006). A random coefficient autoregressive Markov regime switching model for dynamic futures hedging. The Journal of Futures Markets, 26(2), 103-129.
14. Lien, D., Tse, Y. K., & Tsui, A. (2002). Evaluating the hedging performance of the constant-correlation GARCH model. Applied Financial Economics, 12, 791-798.
15. Park, T. H., & Switzer, L. N. (1995). Bivariate GARCH estimation of the optimal hedge ratios for stock index futures: A note. The Journal of Futures Markets, 15, 61-67.
16. Politis, D., & Romano, J. P. (1994). The stationary bootstrap. Journal of the American Statistical Association, 89, 1303-1313.
17. Sarno, L., & Valente, G. (2000). The cost of carry model and regime shifts in stock index futures markets: An empirical investigation. The Journal of Futures Markets, 20, 603-624.
18. Sarno, L., & Valente, G. (2005a). Empirical exchange rate models and currency risk: Some evidence from density forecasts. Journal of International Money and Finance, 24, 363-385.
19. Sarno, L., & Valente, G. (2005b). Modelling and forecasting stock returns: Exploiting the futures market, regime shifts, and international spillovers. Journal of Applied Econometrics, 20, 345-376.
20. Sullivan, R., Timmermann, A., & White, H. (1999). Data-snooping, technical trading rule performance, and the bootstrap. Journal of Finance, 54, 1647-1692.
21. Tong, W. H. S. (1996). An examination of dynamic hedging. Journal of International Money and Finance, 15, 19-35.
22. Tse, Y. K., & Tsui, A. K. C. (2002). A multivariate generalized autoregressive conditional heteroscedasticity model with time-varying correlations. Journal of Business and Economic Statistics, 20, 351-362.
23. White, H. (2000). A reality check for data snooping. Econometrica, 68, 1097-1126.