COMPARING THE PERFORMANCES OF THE PARTIAL EQUILIBRIUM AND TIME-SERIES APPROACHES TO HEDGING
| dc.creator | Bryant, Henry L. | |
| dc.creator | Haigh, Michael S. | |
| dc.date | 2017-04-01T15:27:26Z | |
| dc.date.accessioned | 2026-07-09T03:26:05Z | |
| dc.description | This research compares partial equilibrium and statistical time-series approaches to hedging. The finance literature stresses the former approach, while the applied economics literature has focused on the latter. We compare the out-of-sample hedging effectiveness of the two approaches when hedging commodity price risk using a simple derivative with a linear payoff function (a futures contract). For various methods of parameter estimation and inference, we find that the partial equilibrium models cannot out-perform the time series model. The partial equilibrium models unpalatable assumptions of deterministically evolving futures volatility seems to impede their hedging effectiveness, even when potentially foresighted option-implied volatility term structures are employed. | |
| dc.identifier | doi:10.22004/ag.econ.18972 | |
| dc.identifier | https://ageconsearch.umn.edu/record/18972/files/cp03br01.pdf | |
| dc.identifier | http://ageconsearch.umn.edu/record/18972 | |
| dc.identifier.uri | http://hdl.handle.net/123456789/532502 | |
| dc.language | eng | |
| dc.publisher | ||
| dc.source | http://ageconsearch.umn.edu/record/18972 | |
| dc.title | COMPARING THE PERFORMANCES OF THE PARTIAL EQUILIBRIUM AND TIME-SERIES APPROACHES TO HEDGING | |
| dc.type | Text |