Minimum variance hedging based on time-varying Copula

作者：Zou QingZhong; Li Jinlin^*; Wang BeiBei

来源：Transactions of Beijing Institute of Technology, 2011, 31(11): 1383-1386.

• Hedge ratio
• Minimum variance
• Normal Copula function
• Time-varying Copula

Based on the minimum variance hedge ratio, the time-varying normal Copula function is brought forward to calculate the median correlation coefficient to instead the Pearson correlation coefficient for improvement of the hedging efficiency. The time-varying normal Copula introduced can capture the dynamic change of dependence structure between futures market return and spot market return to solve the problem of hedging distortion. The median correlation coefficient can measure the nonlinear relationship to guarantee the accuracy of hedge ratio in extreme condition. The empirical test shows that the effectiveness of proposed model is higher than present ones. The proposed model can hedge the spot market risk more effectively.

• 出版日期2011
• 单位北京理工大学