Hedging with Futures: Multivariante Dynamic Conditional Correlation GARCH

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Abstract

In this paper, we apply three multivariate GARCH models for estimation of dynamic hedge ratios. We provide an empirical comparison of the effectiveness of those models in the Russian and foreign financial markets. Dynamics and interdependence between futures’ and spot prices of assets are captured by vector error correction models; volatilities and correlations are modeled by dynamic conditional correlation multivariate GARCH.

Keywords

multivariate GARCH dynamic conditional correlation dynamic hedge ratios Russian financial market 
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Copyright information

© Springer-Verlag Berlin Heidelberg 2012

Authors and Affiliations

  1. 1.Tor Vergata University of RomeRomeItaly

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